2013 What Can Investors Expect?

The Property Professor looks at the year ahead for property investors, and tells us which suburbs are worth a closer look.

It would be nice if we could gaze into a crystal ball to look at what is in store for the future but I have yet to find a crystal ball that works!

However, we can try and forecast what could happen in the future by analysing what’s happened in the past and what factors will influence the future.

Firstly, let’s have a look at the past 12 months (12 months to end of Oct 2012 – RP Data).

Capital City and Capital Growth

Darwin +8.6%
Perth +3.5%
Sydney +0.6%
Brisbane -0.8%
Canberra -1.6%
Adelaide -3.5%
Melbourne -4.4%
Hobart -4.6%
All Australian Capitals -1.1%

Based on the points above, the past 12 months haven’t been terrific and except for Darwin, all capital cities have performed well below their long term average. However, our fortunes could be changing. See the points below.

Let’s have a look at the past 3 months (3 months to end of Oct 2012 – RP Data).

Capital City and Capital Growth

Darwin +1.5%
Adelaide +1.3%
Perth +0.7%
Sydney +0.7%
Melbourne +0.4%
Brisbane +0.1%
Canberra -0.8%
Hobart -5.7%
All Australian Capitals +0.5%

In recent times, all the major capital cities have seen growth in their property prices.

Will this continue?

Only time will tell, but there are some negative factors that have heavily influenced the property market over the last few years that in my opinion, will be of less importance in 2013 and beyond.

US debt crisis
The U.S, the root cause of the Global Financial Crisis (GFC), has finally started to see some growth in crucial sectors, including housing and employment. This doesn’t mean that the country will experience economic bliss from now on, but at least the economy and crucial sectors of commerce and industry are moving in the right direction.

Eurozone crisis
Since the GFC, many regions and countries have suffered. In Europe, it is the PIIGS (Portugal, Italy, Ireland, Greece, and Spain) that have attracted the most attention. Unfortunately these countries have been suffering with high unemployment and negative economic growth for a few years, as a result of overspending during their buoyant economic times. We’ve been constantly reminded of this situation in the media and it has scared Australians into saving more and spending less.

This situation will likely transform itself from a crisis into a bad situation. The new norm for some of these European countries will be high unemployment and slow growth for many years to come, but the world will continue to move forward. Just like the once powerful Japanese economy slowed down over 20 years ago (and has yet to see great improvement), the world economy has continued to grow.

Federal Election
One of the big dampeners of business and consumer confidence is the state of affairs in Federal politics. The minority government situation is hindering progress in the economy as many major decisions are not able to made and followed through as there are too many other people, parties and policies that must to be satisfied.

Add to this the personal attacks that are made on both sides of politics and you have a perfect recipe for low business and consumer confidence, and an unwillingness for people to spend money.

However, there will be a Federal election in 2013 and (hopefully) we will have a majority government that can make some hard decisions and act upon them. If the personal attacks also stop, that would be a huge bonus and we should see confidence lift.

In my opinion, it’s lack of confidence that’s the major influence holding back the economy and the property market.

If we can focus more on the good news in Australia and less on what is happening in the U.S. and Europe, this should see us gain some confidence and start spending again.

When you do get back into your spending mood and you are looking for properties to buy, you might like to focus your attention on the following suburbs.

Melbourne