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Below are some statistics which illustrate the performance of all the capital cities over the last 12 months. As you can see, every capital city experienced a drop in property prices.
Capital City & Capital Growth (1 year)
Sydney -0.3%
Canberra -2.2%
Darwin -2.3%
Perth -4.3%
Adelaide -4.4%
Hobart -5.9%
Melbourne -6.1%
Brisbane -6.8%
(Source RP Data)
The reason for nationwide (and world-wide) decreases in property prices last year has been the aftershock from the Global Financial Crisis (GFC). Specifically, the effect of the European debt crisis on the global economy and in particular, its effects on Australia. This has created a lack of business and consumer confidence which has dampened demand for property which in turn has seen prices drop. This state of affairs is set to improve marginally this year as the panic of the situation dissipates and the reality of very long and very slow European recovery sets in.
If we go further back in time, the differences in performance between the capital cities over the last five years has been even greater. The following statistics show growth rates on a per annum basis over 5 years.
Capital City & Capital Growth Average Annual Growth (last 5 years)
Darwin +8.8%
Melbourne +7.6%
Adelaide +6.0%
Canberra +5.0%
Sydney +3.7%
Brisbane +3.6%
Hobart +3.0%
Perth +0.2%
(Source RP Data)
As shown in the figures above, there has been a wide range of price growth across our capital cities. Darwin property prices benefited from its resources boom and Melbourne’s property prices were driven by increased migration and a vastly improved intake of international students. Conversely, Perth is still suffering the hangover from its stellar growth, which was driven by its resources boom.
When trying to forecast the future, it helps to look back into the past. However, past performance is just that; it’s in the past. There is no guarantee that a city/suburb/area that has been underperforming in the past is due for a change in fortunes. You have to look deeper into the local economy and property market to analyse what is causing property prices to move up and down.
As has been shown, not all property prices will increase at the same rate. Some cities will experience higher growth than others due to local factors. If you can pick cities/areas that are about to outperform the market, you can markedly increase your wealth in a relatively short space of time. Consider the following example. Let’s imagine you bought two properties five years ago. Let’s say that each property was valued at $300,000. You decided to buy one in Perth as you wanted to capitalize on its resources boom and you bought the other property in Darwin as you felt it was about to experience marked growth due to its resources boom. Using the growth rates in the above table, the Perth property would now be worth $331,224 but the Darwin property is worth $457.368. That is a difference of well over $120,000 in five years! The Darwin property outperformed because it was experiencing a resources (and property) boom whereas the boom in Perth was over.
If you are looking to capitalize on the next property boom, my research indicates that Adelaide will be the best performing capital city over the next five years. Why I hear you ask? Just as Darwin property prices outperformed all other cities in the past five years and Perth property prices outperformed in the five years before that, Adelaide is set to do the same for the same reason; resources boom. South Australia is home to Olympic Dam. It is a HUGE mine owned by BHP. It has the largest uranium deposit, third largest gold deposit and the third largest copper deposit IN THE WORLD. All this in one mine, only a 45 minute flight from Adelaide. South Australians are all waiting in anticipation for the board of BHP to give the final go ahead for the expansion of the mine. Once this occurs, it will be the largest open cut mine IN THE WORLD.
While nobody can be certain of what may happen in the future, imagine having the largest mine in the world in your backyard. Can you imagine the property boom? I can!
Many of our students, clients and I are currently buying property in Adelaide in anticipation of this property boom. If you want to markedly increase your wealth in the next five years, you might want to seriously consider doing the same.
Contact Property Planning Australia to discuss how Peter Koulizos and the team can assist you to buy in Adelaide or other capital cities in Australia.
• Written by Peter Koulizos, university lecturer, author and property advocate.
