Nine Property Predictions for the next 10 years...

From Michael Yardney

1. Lower capital growth
2. Relatively low interest rates
3. The growth of our service industries
4. The property markets will become more fragmented
5. More apartment living
6. A bust in the inner-city apartment market
7. Lower population growth
8. There will be more “white noise”
9. There will always be an “X factor”

Details on each point can be found in the article

Some of them are obvious while others not so obvious.

So based on above I think Michael predicts the best places to invest with highest probability of greater capital growth would be in Melbourne and Sydney with bias towards inner city.

Cheers,
Oracle.

 

thanks Oracle

I believe some of this is actually already happening.

After boom comes bust

Melb service industry is growing, mentioned this on another thread.

 

I would not like to try to predict the capital city with the highest capital growth over the next 10 years. That's a really difficult task.

Sydney and Melbourne certainly have better fundamentals but they are coming off a very high base with the markets there peaking. The WA economy is in freefall with no clear plan to recovery. However, housing prices are lower than they have been for many years, in some cases since 2007.

So you have one city basically in recession (1) but coming off a low base in prices (2) and two cities with very strong economies, but markets peaking.

In the next 10 years, Sydney and Melbourne will correct and recover, but to what level will the recovery be? In the meantime, the WA economy will continue to decline then recover and housing prices in Perth still need to bottom out and then recover. In that context I would not try to guess which will come out on top.

(1) Western Australia recession plain to see
(2) Perth housing most affordable in 13 years - reiwa.com

 

@Perthguy I am not over the WA market or economy at all, however, heard an economist speak about the situation there in relation to the economy and that the 1.5% cash rate is still too high for their conditions and was saying that there was a need for a more localised approach to rate setting. I think he said the economy there at the moment is needing of a zero cast rate or even slightly negative. Would you say that is accurate from your observations?

 

So, WA is struggling, set interest rates to 0%, Sydney is booming, set interest rates to 4%?

Reserve Bank's rate dilemma: WA recession v NSW boom

The question is whether a 0% cash rate would fix the Western Australian economy. Interest rates are a rather crude lever to stimulate an economy. What we really need is jobs and a more diversified economy. It's not clear that 0% interest rates would deliver that.

 

Totally agree. I think we are heading for a 0% cash rate which will make cash trash, if it isn't already.

 

I think most economists are full of it. The only job where you can get paid to guess at stuff and not suffer any consequences if you're wrong!?

RBA cash rate won't make a lick of difference to Perth/WA economy, whether it's @ 0% or 3%.
WA's economy is largely driven by market services and exports of minerals. See this publication from WA DSD.

Investment in manufacturing and agriculture could provide a useful boost to the economy, but overall, the "market services" sector is the key driver that can be influenced with combined state and fed govt policy. If states were allowed to set their own taxes like Canada's provinces do (while the fed govt collects a 5%GST), then you could create competition between states, with potential to bolster WA's investment attractiveness.

Right now WA is in the too-hard basket because we're 2hrs behind the east coast, we only have 10% of the Australian population and Perth is still a 5hr flight from Sydney, Brisbane or Melbourne. AND there's still the hangover of the mining-bust (seems to have stabilised, but people still feeling seedy from the hangover)

 

Agree.
The issue is also no point buying when rents are going pear shaped. My g/friend has been trying to rent out a great unit in the hub of Mt Lawley, ticks all the boxes, no takers, she will have to drop price again, even thinking of offering 2 weeks rent free. Oversupply is the issue - rents and stock

 

It sounds like it is far more complex than setting a nil cash rate and hoping for the best. Just trying to get a handle on the situation over there.

 

Thank you for your opinion. It does make a lot of sense. FWIW I do not agree nor listen to most economists without drawing my own conclusions. Lots of clueless people out there passing off as educated opinion.

 

Agreed mostly. Except if apartment living becomes a mainstream choice of life, surrounding land becomes a luxury, and there will be high capital growth. Aka HK, London, NYC, Tokyo.

 

It's really a lack of jobs and a lack of any real prospects of growth in jobs that is driving the economy down over here. The transition from a mining based economy to something else is going to take time. For that to work, we would need a clear idea of what we are transitioning to and then government policy and investment to head us in the right direction. We don't have that.

 

I don't have a problem with economists, they have their place. I just can't resist having a go at them. Maybe I'm just jealous.

 

There is limit to what monetary policy (RBA) can achieve....beyond that its fiscal....Blame rests with the politicians not the economists.

 

I find it very hard to believe that apartment living won't become the mainstream choice. With net migration into Sydney and Melbourne so high, I just can't see a way to accommodate without more apartments being built.

Unless of course people are happy with a 2 hour commute!

 

Fast speed trains may solve that. But Aus will never have that.

 

Build a Disneyland in Perth.

 

I can see apartment living becoming alot more common and seen as a first choice rather than something you choose because you can't afford a house .

How places are perceived will develop on how they are incorporated into the surrounding facilities . Good local shopping , parks for kids to play in and convenient desired ocation will become popular and do well .

Cliff

 

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