While we love Sydney and Melbourne as property investment destinations, this year they did not make it into our preferred list of cities to invest. Both cities are going through property market correction at the moment. While fundamentally we believe they are strong, blue chip destinations, in medium term we don’t see significant uplift in Sydney and Melbourne.
Brisbane and Perth made it into our preferred locations to look for property deals that stack up. Brisbane property market provides potentially strong growth prospects.
Both Brisbane and Perth property markets are relatively affordable compared to Sydney and Melbourne. Both cities are much smaller economies that the two largest capitals, even when adjusting for economy we think property affordability remains attractive. Financial Services Royal Commission and regulator crackdown is resulting in significant reduction of how much people can borrow. We believe this would mean that people will spill into cheaper and more affordable property markets.
Buying property just because it is cheap could be dangerous. The reason we are optimistic on Brisbane and Perth is due to these two property markets remaining fairly affordable while exhibiting sustained economic fundamentals. Even in Brisbane property market, Perth property market or any other property market it is important to perform own due diligence. Not all properties are the same and not all of the properties will produce same growth or return.
We are monitoring Perth property market very closely. We think this market is close to bottom if Perth property did not bottom out yet. The vacancy rates are tightening. We would like further decrease in vacancy rates. Overall we think that the health of Perth property market is starting to recover and it is becoming a very interesting market.
Brisbane property market has been fairly stable even with declines in Sydney and Melbourne according to Corelogic data. We are seeing Brisbane as a stable market that tends to attract significant amount of owner occupiers from interstate when Sydney and Melbourne become un-affordable.