The longer term outlook for Australia property values

Interested in starting a thread on peoples thoughts on the outlook for longer term property values.

I think some of the key factors influencing longer term property prices, mainly referring to metro cities, is Australia's position as having one of the fast growing populations, in percentage terms, of advance nations which comes mainly from migration. Also the position we have being one of few western, english speaking, democratic nations in the asia time zone in a region with a rapidly growing rate of household wealth which has an increasing interest in Australian property.

I suspect though that future property growth rates will be lower than the high rates of the 80s and 90s during the time of financial sector regulation. And that historical factors of demand growth such as first home buyers will negate. I suspect future growth rates closer to CPI are more likely.

What do others think?

 

Agree think 1990s, mostly slow and steady growth but thats okay.
Who knows?

 

I suspect we'll also have a greater divergence in prices between Sydney/Melbourne - other metro cities - and other regional areas. Due to the bias of Asian capital for larger cities.

The risk is an Asian regional financial crisis or other regulatory changes such as changes to negative gearing or CGT for property or ability for foreigners to buy property that could affect prices.

 

"The answer to life,the universe and everything is"... 42

 

Maybe or it could just be a normal cycle with years of underperformance in the Sydney market returning to a trend value premium relative to the other capital cities.

 

Maybe just look at it like this,China long term plan is to secure long term and not only from Australia commodities for the short-longterm to fuel it still rapid growth ,,that will not stop Chinas Infrastructure Investment Bank has a capital base of 100 billion$$us$$,and if anyone is linked to see the sales per week-day qld wide then ?..

 

I think that looking at our rapid population growth in isolation is selling short any crystal ball visions or hypothesis of what the near future (shall we say the next 10-20 years?) Holds for Australia.

I say this because I fall back on industry and economic growth as the main driver we need to get right, to see a consistently growing overall AU property market. Think about it.. what good is it if we keep adding people, but not adding jobs for them to come to? Technology, offshoring (due to AU labor being far too expensive in many sectors), globalisation, and lack of consumer demand are all taking it's toll on AU's medium term jobs outlook.

Uni's are going berserk right now, making a tonne of money shelling out degrees left, right, and centre. Problem is, they are skilling students for jobs that may not exist in five years' time, or worse, professions that are full up and have zero jobs available in them.

Dont get me wrong; I am a glass half full kinda guy

What I am saying is this: even if we add people every year, whilst yes the argument still stands that "they will all need a roof over their heads", if there arent enough jobs to go around, or the jobs that are offered, arent paying as much as they used to, well then more people may not pay as much to rent your property. The net effect is low rental yields that, if prolonged, will eventually have the knock on effect of dampening capital growth rates (with some areas possibly going backwards).

Think about this; if most of the flashy, traditionally higher-paid CBD jobs that everyone wants so badly, get more automated, ooffshored etc., then the remaining lesser-paid jobs will likely be the ones that can be done anywhere (I.e. nurses, teachers, etc.).

CBD-yearning folks will start to question tbeir lifestyle choices and say to themselves 'Wait a sec, why do I want to pay so much to live in this expensive capital city, I'm only a nurse for crying out loud, I can earn the same salary in a coastal or regional big town, and pay FAR less overheads and outlays than living in cap city".

So what is the medium term outlook then? Hard to say, but I've always believed that large regional towns within a 3-hour drive of cap cities wil actually be some of the dark horse star performers in terms of growth in coming decades. Ones that have decent local economies and that can also benefit from cap-city-fleeing people.

I'd go the extra mile on this one to add that another belief i hold dear for this period of time will be the global fight for food. I think property markets in food-bowl regional towns will do well, because ag and food in general will do well, because in our lifetimes we are facing a planet with 9 billion humans squashing into it :/

How much of the ag/farm/food industry will be roboticised and/or automated? Hard to speculate, but one has got to imagine that human labor will remain a critical part of ag and food - the fasteat growing industry globally - in coming years. Food-bowl towns, regional port-towns, and logistics towns etc., well, they might just do very well indeed...

 

Likely , yes. I would probably categorise brisbane along with syd and Mel as the tier 1s, and maybe perth as well. I think there will be a widening divergence between these and the rest.

 

http://www.theatlantic.com/business/archive/2015/01/suburbs-and-the-new-american-poverty/384259/

I read this article over the weekend and like much of the writing it is very poignant, well written and for me personally very sad.

Anyways, in relation to the topic at hand, it demonstrates the continual power of cities. The centripetal forces conglomerating knowledge workers together at the expense of less densely populated areas. I realise the article is about Atlanta and there are a myriad of other factors at play not relevant to australia ..yeah I'm talking about race but I see increasing concentration of wealth and by association housing prices in close proximity to inner city CBDs.

 

Middle to long term I expect slow steady growth for house prices mainly because the Australian Government and Australian banks have committed to using property as an investment. Personally I think income inequality is going to increase and more and more, which is going to be the result of technology and globalisation. Even in Japan where population growth has been stagnant this has been the case as there are less ‘good’ jobs to go around. Companies are still making a lot of money but with technology they have gained instant productivity increases without needing to employ any more staff, and in many cases they actually reduce staff. Take the banking industry for example.

http://www.therichest.com/rich-list...es-with-the-worst-income-inequality/?view=all
“Japan has a saying “ichioku-sohchu-ryu” which translates to “a nation of middle-class people.” However, in the past few decades, they’ve seen the middle-class shrinking at twice the average rate of other OECD countries. Since 1980, incomes have dropped for the lower classes while they’ve risen for those in the higher classes. And this problem is exacerbated by the lack of employment security. During Prime Minister Junichiro Koizumi’s term (2001-2006), the number of people working regular jobs dropped by 1.9 million while numbers of those in temporary positions rose by 3.3 million. Since the middle-class started disappearing, there’s been a reported increase in depression, domestic violence and suicide – which indicates the toll the economy has taken on the people”.

In Australia there has already been a transition away from permanent jobs into casual and contract jobs as the labour market has been deregulated, which obviously favours employers in the guise of employee flexibility. Unemployment in Australia was certainly higher during the 80s and 90s; however, underemployment is arguably higher now than it was back in the past.

As for income inequality in the USA this has been the case for a long time. Income inequality is now at its highest level since 1928. As for the future within the next 20 years it’s predicted that almost half of the workforce in the US will be employed in low paid service sector jobs e.g ‘do you want fries with that’.

 

We are in a property forum and property is important for the overall economy but lets not get carried away that its the overriding factor of our future economic development.

I'll look it up, but apparently there are 'developed economies, developing economies, Argentina and Japan'. Meaning that Japan is an outlier in socio-economics i.e incredibly low birth rate and virtually no immigration.

Agree

Agree

Many things are predicted including the second coming, I am of the opinion that the US always manages to re-invent itself.

 

It's a good point. Inner city areas up to the early 80s were seen as places for the poor to live, while outer suburbs provided families with large blocks of land with big homes. Fast forward to 2016 and perceptions have all changed. I also wonder, as density increases, will there be a shift in thinking, again.

 

I wonder that as well. Will a sea/tree change revolution take over Gen X/Y down the track? Uncoupled from the office with super fast internet, will much of society embraces a new ethos of non high density living.

Who knows ??...but at the moment it seems all of our knowledge workers and high value added people wish to huddle together a few km from downtown.

 

Next 2 years - rest of this year for growth, then flat for next year...boom ends and rates start to go up a little bit - will scare a lot of buyer folks away...

Next 5 years - same as above, but very low growth from year 3 to 5 - maybe 2% per year.

Next 10 years - same as above, with another strong growth period in years 5-10. maybe only the last 3 years.

10 year window - expect many median properties to get close to doubling in value...like every 10 years for the last hundred years.

 

It all depends at where and what the jobs growth will be. Ag and farming will be huge but how much will be automated?

 

Gosh - I used to be so active in these threads. Now I just read.

I simply can't see any kind of stellar performance in the Aussie economy - across any and all sectors - until we get some semblance of a competent government and one that understands that to grow the middle class you need to protect their rights while incentivesing the upper end of town to do what they do best - provide employment opportunities.

Too much partisan black and white speak and think to make an effective economy work.

Until then, expect the malaise to continue.

 

I agree , it's interesting that that someone like Gerry Harvey is investing 80M in a dairy enterprise in Northern Vic and the rhinehart clan doing something similar .

The potential with automation and robotics in ag blows me away . It seems the changes are so fast . What all this means for property in the close regions is a hard one .

 

Farming and agriculture is always going to be an essential part of the economy so I think that's a good investment, particularly since Australia is supposed to 'the food bowl of Asia'.

As for automation and robotics there's a lot of potential but the same things have been said ever since the industrial revolution. There are always claims that technology is going to make work a thing of the past but what seems to happen is it just redefines the type of work that gets done. Agriculture isn't a very labour intensive process so I expect the city-centric trend to continue.

 

Surely though, agriculture (production of food) will spill over in to manufacturing of said food? Food manufacturing and processing would likely be affected by robotics and automation however...

Bringing that back to property... ag might be huge but if it doesn't stimulate jobs growth because of lack of humans needed (for whatever reasons), maybe the property values and rental demand won't benefit in those at towns?

 

Well, as long as the Government does't block or control foreign investor to buy property here in Australia, then it would be going well.

Because the only thing that Australia can offers is the proeprty economics and the price stability.