Rona market review
Having worked for JLL for several years (Australia’s Largest property services firm) I learnt that bigger is better when it comes to research. They have bigger proprietary databases (huge valuation businesses), big data budgets, and teams of people to crunch the numbers. I thought it would be unwise to suggest that my understanding of markets was supreme to the insights of the teams of research professionals at the major property companies. To that end, when I started my business, I decided that I would gather the insights from the biggest to communicate the most transparent cross section of analysis, which I think is the best kind of research.
Anyway, here we go!
What does the research say?
After reviewing the most recent residential market research from JLL, HTW and CBRE I see a consensus. The consensus is: uncertainty is high, confidence is low – makes sense, right? However, it appears South-east Queensland (SEQ) has a solid supply/demand balance meaning that values appear to be holding, with no median value falls over the quarter to May and positive year to date figures. This balance should also limit short term downside risks. Generally, analysts agree that SEQ affordability relative to the other “big boy” states puts us in a better position to weather the downturn. SEQ is the “steady as she goes” state which rarely exhibits the peaks and troughs seen down south and typically offers higher average gross yields. Vacancy rates also remain low, vacancy rates are a valuable lead indicator for market volatility – if there are empty properties this could suggests a supply/demand imbalance which usually leads to downward pressure on values.
Key things to watch moving forward are:
end of loan holidays;
new criteria for JobSeeker and JobKeeper;
real unemployment figures;
numerous geopolitical situations (primarily China Trade, US election).
My thoughts
For now, the story for SEQ is relative stability. This assumes that the worst of Aunty Rona is behind us – if a major second wave engulfs Australia then all bets are off. Economic conditions will be the catalyst for markets to move off the starting line or stall on the line. There are two primary schools of thought when discussing the economic recovery, V shape or U shape. Some would have you believe we are in for a V shaped recovery - personally I think this is disingenuous and impossible. I would consider a U shaped recovery more likely, predicated on a vaccine or another viable solution to open economies and restore some confidence. Then, there is a long list of things which need to be unwound and cleaned up before we return to parity, let alone real growth. However, we are talking about economic growth here and not growth in property markets, property markets could move far sooner, I believe once blue sky is visible beyond the horizon is when the smart money will begin to make moves.
What’s the opportunity?
I do believe there is an opportunity to leverage uncertainty, uncertainty produces fear and fear can produce a great deal. However, this requires confidence, effort, and thorough due diligence, after all, there is no such thing as a free lunch.
So what does it mean?
For mine, the moral of the story is this: unlikely short-term median upside, likely but limited short-term median downside.
I have no doubt there is more volatility to come, you only have to read the news to know that, however I do believe that select property will remain a good investment through these times. I chose to use the word select for a very specific reason, all of the above is based on the median which means some will perform better and others will perform worse. If you BuyWise you will be able to outperform the median while protecting your position.
There is definitely more to all of this, monetary policy, fiscal policy, geopolitical considerations, blah blah blah, and I would love to discuss it with you, however I know we all have attention span of a gold fish so I thought I would keep it simple.
JC