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National property booms are rare in this country. There are always regional differences playing out at any point in history. For investors, this is a good thing.

People often ask me if this is a good time to buy. I tell them it’s the wrong question. The right question is: where is it a good time to buy?

At any point in time, it’s a good time to buy somewhere in this vast and diverse nation.

I’ve spent some time studying a table listing the median house prices for our four largest cities and their annual growth rates since 1970, compiled from data from the ABS and other sources.

Over the almost 50 years covered by this table, there are only two short periods in which all four cities recorded double-digit price growth at the same time.

Most of the time Sydney, Melbourne, Brisbane and Perth have been doing their own thing: each has had strong growth periods during which the other three were not rising strongly.

According to these figures, Sydney had four years of very strong price growth from 1978 to 1981. During that same time frame, Melbourne and Perth had only moderate growth, while Brisbane sparked to life in 1981 and 1982.

Melbourne surged strongly from 1983 to 1986, but during that period price growth was negligible in Sydney, Brisbane and Perth.

Sydney and Melbourne both started strong growth markets in 1997, extending through to 2003. But Brisbane and Perth didn’t rise until 2002.

Perth continued to have very strong from 2004 to 2006, but the other three cities were weak during that phase.

Both Sydney and Melbourne had big growth from 2013 until recently, but neither Brisbane nor Perth joined the party.

The only brief periods in which all four major cities were strong in unison were 1988-1989 and 2002-2003.

Why do we have these regular differences? Because the national factors commonly quoted by economists to explain Sydney’s boom – like cheap and easy finance, and tax benefits for investors – are not the fundamental drivers.

Keep in mind that those two periods where we did have something approaching a national boom – the late nineties and the early noughties – were both periods when interest rates were high and rising.

Low interest rates and easy debt have not created booms in Brisbane, Perth, Adelaide, Darwin or Canberra in recent years.

Other major forces are in play. The strength or otherwise of the local economies are the dominating factor. 

The two cities (Sydney and Melbourne) underpinned by the strongest state economies, helped along by major infrastructure spending and strong population growth, have had property booms.

Cities (like Brisbane and Adelaide) with lukewarm economies have had moderate or stagnant property markets while those (Perth and Darwin) afflicted by very weak state economies have had property prices in reverse.

Hobart has risen recently on the back of big improvements in the Tasmanian economy.

It doesn’t surprise me that Brisbane and Perth have often had different property cycles to Sydney and Melbourne. The underlying economies of Queensland and Western Australia (with their strong reliance on the resources sector) are very different to those in NSW and Victoria.

In terms of what happens next, I think it’s significant that both Brisbane and Perth started property growth cycles in the early part of this century around the time that Sydney and Melbourne’s previous run was ending.

Right now, Sydney and Melbourne are winding down after four to five strong years. And the evidence is mounting that Brisbane and Perth are on the cusp of growth phases, helped by multiple factors including a revival of investment in the resources sector.

I would add Adelaide to the list, with the South Australian economy showing increasing signs of better performance, with more predicted to come. ~ Terry Ryder

 

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