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John McGrath
Property Expert
+ About John McGrath
About John McGrath - Founder and Executive Director, McGrath Limited

John McGrath is considered one of the most influential figures in the Australian property industry. As Founder and Executive Director of McGrath Limited, , he took McGrath Estate Agents from a lounge room start-up in 1988 to one of Australia's most successful residential real estate groups, listing McGrath Limited on the Australian Stock Exchange in November 2015.

An integrated real estate services business, McGrath today is one of the fastest growing real estate companies in Australia with a strong market presence in NSW, the ACT & Queensland, and a growing presence in Victoria.

In October 2008, John was honoured by the Real Estate Institute of NSW with the Woodrow Weight OBE Award, a lifetime achievement award for his outstanding contribution to the real estate industry.

John himself has become a spokesperson for the industry both in Australia and internationally. John has five books that have reached bestseller status including “You Don’t Have To Be Born Brilliant” and “You Inc.”. In “The Ultimate Guide to Real Estate”, John shares with the reader his invaluable knowledge on the Australian property market.

John is a Director of REA Group and also the South Sydney “Rabbitohs,” which is one of his great passions.

The transformation of regional hubs

Tuesday, December 12, 2017

Australia is one of the most urbanised countries in the world with 67% of our population living in a capital city today. However, as house prices in major cities like Sydney and Melbourne become more expensive and industry seeks cheaper bases of operation – bringing hundreds of jobs with them, many Australians are embracing smaller cities as a great place to live and work. 

Most of these small cities are formerly regional industrial hubs close to our capitals that have transformed into attractive lifestyle centres offering more affordable housing, employment opportunities, a strong sense of community and a more relaxed way of life. 

New transport and roads infrastructure has brought these regional cities closer to the capitals, enabling locals to commute and earn a big city income while enjoying a small city lifestyle that includes far more affordable housing. Telecommuting is also enabling more people to base themselves in lifestyle locations. 

As revealed in our McGrath Report 2018, Wollongong and Newcastle in NSW, Geelong and Ballarat in Victoria and Toowoomba in Queensland, are among the most important key regional markets to have transformed themselves over the past 20 years from old industry satellite towns to attractive regional cities. 

According to the Victorian Government’s Regional Network Development Plan, 40% of all regional growth to 2031 will be in the cities of Geelong, Bendigo and Ballarat. 

Wollongong 

Median house price $720K, up 15.2% over the 12 months ending June 2017

Located 80km south of Sydney, Wollongong was once a blue collar industrial town but today it is a coastal lifestyle centre known for its pristine beaches, leading university and arguably the most appealing commuter housing market for families priced out of Sydney. 

It has always been a major export location for coal and other goods and also home to steel manufacturing but the city is shedding its industrial reputation.  Key sectors now include IT, business service and finance, education and research, health and tourism. 

Wollongong’s population increased by 10.5% over the decade to 2016, the latest Census shows. 

The University of Wollongong is one of Australia’s top ranked universities, employing 1,000 people full time and educating 23,000 students per year – 41% of which are international students. Its Master Plan 2016-2036 will elevate the university’s role in Wollongong’s economy and provide an even bigger hub of employment. 

Price growth is being largely driven by Sydney families, local upgraders and a move to encourage immigration outside capital cities through the Regional Sponsored Migration Scheme. 

In the 2017 NSW state budget, $15M was allocated towards planning a 35km extension of the F6 through southern Sydney to Waterfall to relieve congestion and provide a faster journey for Wollongong to Sydney commuters.  

Newcastle

Median house price $570K, up 11.8% over the 12 months ending June 2017

About 160km north of Sydney, the population of Newcastle was 155,411 at the last Census and the City of Newcastle predicts it to exceed 180,000 people by 2036. 

Newcastle has been undergoing a construction boom, as evidenced by the massive redevelopment of the old Royal Newcastle Hospital site into the $100M Arena Apartments due for completion this year. 

The value of construction approvals topped $1B for the first time in FY17, according to Newcastle Council. Among the approved projects were the Verve Residences, two 19-storey towers with 197 dwellings; a new hotel on King Street; and the $88M redevelopment of Westfield Kotara. 

Major recent projects include the largest regional courthouse in NSW, a new $95M city campus for Newcastle University, the Hunter Expressway and the $500M light rail and transport interchange expected to be completed in 2019. 

While Darby Street in Cooks Hill and Beaumont Street in Hamilton remain the city’s eat streets, great restaurants are popping up everywhere. A former Tooheys warehouse is now a craft beer café, The Grain Store; and an old bank is now home to fashionable drink spot, Reserve Wine Bar. 

Ballarat 

Median house price $325K, up 4.8% over the 12 months ending June 2017.

The historic city of Ballarat, located 105km north west of Melbourne and famous for being the heart of Victoria’s gold rush, was previously a manufacturing region. Today, more people are working in professional service with hospitals the biggest employer followed by school education and cafés and restaurants. 

Ballarat is one of Australia’s fastest growing inland cities with 101,686 residents today and a projected population of 145,197 people by 2036, which is massive growth of about 36%. 

Ballarat is still home to McCain Foods, which announced a $57M revitalisation of its potato plant in June 2017; as well as Mars Incorporated, which employs more than 2,000 people; and train builder Alstom Australia. 

In its last budget, the Victorian Government announced it would move 600 jobs from eight departments to Ballarat. Construction is expected to start on the GovHub office at the redeveloped Civic Hall site in 2018. 

Steeped in gold rush heritage, Ballarat provides many weekend family activities at historical museums such as Sovereign Hill and Kryal Castle. Lake Wendouree offers many attractions and recreational activities including the Ballarat Botanical Gardens, Steve Moneghetti walking and running track, cycling trails, bird watching, a playground and barbecue facilities. 

Geelong 

Median house price $445K, up 2.4% over the 12 months ending June 2017.

With its spectacular beaches and cosmopolitan shopping precincts, Geelong is increasingly luring Melburnians to the coast. About 75km south west of Melbourne, Geelong has had astounding population growth of 18% over the past decade alone. 

Factors driving this growth include the relocation of government workers from Melbourne and the revitalisation of the CBD with new eateries, bars and retail outlets. Corio Street’s former wool exchange is now an entertainment complex with a good roster of Australian bands. 

Geelong was once amongst Australia’s largest manufacturing centres but this has changed significantly with the closure of Shell’s Corio oil refinery, Ford’s Norlane plant and Alcoa’s Point Henry aluminium smelter. In their place, service industries including health and education have grown, with Deakin University climbing up the world rankings. 

WorkSafe Victoria’s headquarters are coming to Geelong, with more than 700 workers to be based in a new building on top of the 90-year-old Dalgety and Co. Ltd in the CBD from 2018. A new headquarters for the National Disability Insurance Agency will also be established in Geelong, employing 450 people. 

Nearby Avalon Airport is seeking to expand its domestic operations and commence international flights with Federal Government backing, creating more jobs and business opportunities in the region. 

Toowoomba 

Median house price $375K, up 2.2% over the 12 months ending June 2017

Toowoomba, located 125km west of Brisbane, has developed into a strong and thriving regional centre of Queensland where the local population has surged over the past decade from 90,199 to 160,779 people, the latest Census shows. 

Known for its beautiful parks and gardens (the city hosts a Carnival of Flowers every September), Toowoomba is being further revitalised by a new airport and new roads diverting big trucks away from the city centre. 

There are several multi-million dollar infrastructure projects in the works, including the 41km Second Range Crossing bypass due in 2018; and the Inland Rail direct freight link from Brisbane to Melbourne expected by 2020. Construction on the $235M InterlinkSQ rail transfer centre will also start in 2017. 

Accessibility to the area has been improved by the 2014 opening of Brisbane West Wellcamp Airport, about 15km from the Toowoomba CBD. The airport provides exciting business opportunities, with the $35M Integrated Milk Project being built at the adjoining Wellcamp Business Park to take milk products directly to Asia. 

The Toowoomba region is also on the way to becoming Australia’s solar energy capital. A $200M solar project with the potential to generate about 100MW of electricity – powering 32,000 homes, will be built at Yarranlea in 2018. A 100,000-panel solar farm near Oakey is expected in 2018 and the $1B Bulli Creek Solar Farm near Millmerran is expected by 2025. 

 

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Biggest property boom winners

Tuesday, December 05, 2017

By John McGrath

Sydney and Melbourne have recorded phenomenal price growth over the past five years, with house prices rising 66.9% and 39.8% respectively between mid-2012 and mid-2017. 

As of June 30, 2017, the median house price in Sydney was $960,000, representing a capital gain of $385,000 in just five years, according to CoreLogic figures. (Currently it is over $1M).

The median house price in Melbourne being $675,000, with the boom putting on average about $192,500 of new equity into the pockets of home owners.  (Currently it is over $830,000).

As discussed in our recently released McGrath Report 2018, a strong economy, population growth, new infrastructure, a chronic shortage of housing, a spike in investor activity and interest rates falling to record lows have all contributed to this surge in property values. 

Some suburbs have fared better than others, with local factors substantially propelling prices forward in parallel with citywide trends that caused a frenzy of buying in our two big capitals. 

Figures compiled by CoreLogic have identified the Sydney and Melbourne suburbs with the strongest house price growth in the five years to June 2017. 

The biggest boom winners in Sydney were Bringelly (170.1% growth) and Kemps Creek (166%) in the west and Clareville (125%) on the northern beaches. 

Melbourne’s biggest boom winners were Huntingdale (103% growth), Ashwood (91.2%) and Ashburton (90.6%) in the south east. 

In Bringelly and Kemps Creek, land sales have been the key drivers of house price growth. While the two precincts are still largely farming areas, rezoning is expected to change the face of these neighbourhoods in the years to come. Zoning for Bringelly is currently mixed while the majority of Kemps Creek will be industrial to service the new Western Sydney Airport. 

The airport is already bringing jobs and businesses to the area, with initial roadworks underway generating about 4,000 jobs. The Federal Government plans to have the airport operational by 2026 with close to 9,000 jobs in place by the early 2030s.

Over on Sydney’s northern beaches, the affluent beachside suburb of Clareville has seen prices surge over the past five years, with an increase in the number of $4M+ sales over the past 12 months largely behind its incredible growth. 

While the precinct has always been desirable to buyers, its recovery post-GFC was slower than other prestige areas. Buyers have since come to recognise the disparity in value between Clareville and the premium suburbs of the lower north shore, upper north shore and eastern suburbs, which has also been a significant factor fuelling increased demand in recent years. 

The Clareville market has been driven by downsizers, local families upgrading and buyers seeking a holiday home. The appeal of a relaxed beachside lifestyle within an hour of the CBD has made it a sought-after seachange destination. 

The suburb has also benefited from new restaurants, the new Avalon Beach Surf Club and the promise of better transportation to the city with the new B-Line bus service. 

In Melbourne’s south east, the ripple effect has sent prices soaring in our top three suburbs. 

In Huntingdale, the small yet attractive enclave is tightly held with just 19 house sales in FY17 out of only 469 houses in total. Home to just 1,900 residents, its collection of about 20 streets is attracting buyers priced out of nearby Oakleigh, Carnegie, Murrumbeena and Hughesdale. 

Among its amenities is Huntingdale Primary School – one of just 12 bilingual schools in Victoria; and the internationally recognised ‘Home of the Australian Masters’, Huntingdale Golf Club, both located just across the border in Oakleigh South. Huntingdale also has its own train station. 

Just 5km away, neighbouring Ashwood and Ashburton were once considered hidden gems but are now in high demand from buyers priced out of Camberwell, Malvern and Mount Waverley. 

These two leafy suburbs offer an abundance of green space and their large blocks are popular with families. Ashburton has seen an increase in new builds as home owners knock down existing properties to create modern family homes. 

Both suburbs offer good public transport links and easy access to the Monash Freeway, with nearby Chadstone shopping centre and Monash and Deakin universities also major drawcards.

BIGGEST BOOM WINNERS 

Here are the suburbs that had the biggest median house price growth over the boom. 

Sydney:

Bringelly 

$2,525,000 

170.1% 

Kemps Creek 

$2,720,000 

166% 

Clareville 

$2,925,000 

125% 

Galston 

$1,510,000 

123.7% 

Blackett 

$512,500 

123.3% 

Russell Lea 

$2,350,000 

121.5% 

Luddenham 

$1,130,000 

113.2% 

Tregear 

$480,000 

112.4% 

Concord West 

$2,100,000 

111.1% 

Denistone 

$1,850,000 

110.5%   

 

Melbourne:

Huntingdale 

$1,097,000 

103% 

Ashwood 

$1,300,190 

91.2% 

Ashburton 

$1,667,500 

90.6% 

Box Hill North 

$1,231,000 

90.0% 

Mont Albert North 

$1,480,000 

88.8% 

Blackburn South 

$1,161,000 

87.4% 

Highett 

$1,260,000 

85.3% 

Doncaster East 

$1,268,750 

84.1% 

Forest Hill 

$1,010,000 

83.3% 

Mount Waverley 

$1,320,000 

82.1%

Price growth will continue – albeit at a slower pace, particularly in Sydney and Melbourne’s best suburbs.  The citywide medians will rise and fall over many months as the market rebalances.

Overall, there is a possibility of a minor price correction and this would be healthy for the long term sustainability of our major city markets following such a prolonged period of rapid growth.  

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High hopes for property in our nation’s capital

Tuesday, November 28, 2017

By John McGrath
 
Canberra is on track to record the highest house price growth of all capital cities between now and 2020, with predictions of a 16% increase driven by population growth, continuing high incomes and a reduction in detached housing stock, according to respected analysts, BIS Oxford Economics. 
 
As outlined in our recently released McGrath Report 2018, the national oversupply of apartments will see Canberra become one of only two capital cities with any apartment price growth by 2020, although it will be extremely modest at just 2%.
 
These forecasts signal a continuation of Canberra’s two-tier marketplace, with an acceleration in detached home prices and virtual stagnation in apartment prices.  
 
The city’s typically strong economic performance, coupled with a lack of family home stock for sale, has seen the median house price rise solidly by 6.6% to $650,000 over the year to June 2017, according to CoreLogic.  Apartment price growth was sluggish at just 2.9% to a median $442,500.
 
Market conditions have been strong, with the city recording its highest Winter auction clearance rate since 2009 and the fourth highest clearance on record at 69.2%, according to Domain.  
 
Restricted house stock is attributable to a decline in new construction and the ongoing impact of more than 1,000 asbestos affected ‘Mr Fluffy’ blocks being removed from the market under compulsory acquisition by the ACT Government in 2014. Only 400 remediated blocks have been released back into the market so far.  
 
Lack of stock is also contributing to a projected pick up in the renovations sector after a contraction of 6.1% in FY17. A lack of choice in the marketplace is driving some home buyers to stay put and renovate instead, with the Housing Industry Association forecasting renovations activity to increase by 5.1% during 2017-18.  
 
Apartments and other non-detached housing now account for 80% of dwelling approvals in Canberra, according to the HIA. JLL estimates a pipeline of 7,000 new apartments for the city by 2021.  
 
The apartment market is already considered in oversupply but a low vacancy rate of 1.7%, coupled with strong yields, is keeping apartment prices in slightly positive growth territory.  
 
Canberra’s median rent of $420 per week and median yield of 4.9% is expected to continue rising in the short term due to population growth, relatively low numbers of first home buyers and an underlying shortage of rental accommodation.  
 
The ACT recorded 11% population growth between 2011-2016, the largest of all states and territories and equivalent to more than 40,000 new residents, according to the Australian Bureau of Statistics (ABS). Gungahlin was Australia’s second fastest growing regional area with the residential population up from 47,000 in 2011 to 71,000 today.  
 
Latest ACT Government modelling predicts further strong population growth of 6% in Canberra by 2020. About 60% of this growth will be driven by natural increase (births minus deaths) and around 40% through net overseas and interstate migration.  
 
This growth is being supported by major new public projects like the $700 million citywide light rail network, with the first stage connecting the CBD and Gungahlin next year; and a revitalisation of the city precinct.  
 
The City Renewal Authority, established in July 2017, will lead the transformation of central Canberra including Civic, Northbourne Avenue, Dickson, Haig Park and West Basin, with $59 million over four years allocated in the 2017 state budget to begin works.  
 
The government is also looking to hire the city’s first chief engineer to oversee Canberra’s strategic development as the city continues to grow and renew.  
 
A big ticket housing project for 2017-18 will be the replacement of the Red Hill public housing units in the prized inner south. The new residential development will include 108 single dwelling sites, four multi-unit sites and six green spaces. Another 92 townhouses and apartments are planned for three blocks in Holder, Chapman and Wright.  
 
With its selection of art galleries and vibrant restaurant scene, Canberra is shedding its stuffy reputation and becoming an attractive lifestyle and cultural destination. Just last month Lonely Planet, one of the words leading authorities on travel, named Canberra third in the world’s Top 10 Cities 2018 – ranking higher than any Australian city has ever been ranked before in the travel publisher’s annual Top 10 Best in Travel lists. This bodes well for our nation’s capital.

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South East Queensland – property hotspot

Tuesday, November 21, 2017

By John McGrath
 
In our recently released McGrath Report 2018, we discuss how the affordability of South East Queensland is attracting record levels of interstate migration as well as rising interest from investors and first home buyers, with its housing market continuing to produce solid results, despite a sluggish economy. 
 
According to CoreLogic statistics, Brisbane’s median house price increased by 3.0% to $520,000 in the 12 months to June 2017.  However, the apartment market posted a loss, with its median price falling 2.4% to $410,000, which is largely a reflection of the inner city oversupply.  
 
Housing affordability compared to Sydney and Melbourne continues to be Brisbane's calling card for home owners, investors and first home buyers alike. A significant price gap between the cities will underpin rising demand over the next few years.  
 
Queensland currently has the strongest first home buyer market in the nation, with loans to first time buyers surging to 20% of all owner occupier loans in June – the highest proportion since 2009, according to Domain.
 
In July 2017, the $20,000 First Home Owner Grant Boost was extended to December 2017 for the purchase of new homes up to a value of $750,000, with about 4,900 applications received for the grant so far, according to the State Government.  
 
Our agents are reporting far more interest from Sydney and Melbourne investors this year. Brisbane's prospects for capital growth, plus superior rental yields of 4.1% for houses and 4.9% for apartments, continues to make it an attractive option for investors.  
 
Owner occupiers are also increasingly realising the appeal of South East Queensland, which has become a major hot spot for internal migration, according to the Australian Bureau of Statistics (ABS).  
 
Queensland welcomed 11,581 new interstate residents in the year ending June 2016 – a marked increase on 6,417 the year before. In addition, Brisbane recorded its highest internal migration in at least a decade.  
 
Among regional centres, the Gold Coast and the Sunshine Coast led the country with 6,428 and 6,200 new residents respectively. The Gold Coast’s growth was the highest internal migration ever recorded by the ABS since they began this data series in FY07. Compared with FY15, the Gold Coast’s internal migration was up an astounding 39%. 
 
We see a once in a lifetime opportunity for young families to transform their lives with a move to South East Queensland. The massive new equity that home owners in Sydney and Melbourne have gained could buy them an amazing new lifestyle and far less mortgage stress. 
 
On the Gold Coast, excitement over the 2018 Commonwealth Games (GC2018) is growing. GC2018 will inject billions of dollars into the economy, with 6,600 athletes and officials and 100,000 visitors attending the event and a global TV audience of more than 1.5 billion expected to watch it.
 
Three new competition venues and significant upgrades to several other facilities will provide important long term benefits. New venues include the Gold Coast Sports and Leisure Centre, which will boost the economy long term by attracting professional training camps and major events. 
 
Construction of sporting facilities as well as the extension of the light rail have boosted the local economy and property prices are responding and increasing at a healthier rate than Brisbane.
 
According to CoreLogic, the median house price increased 7.3% to $620,000 in the 12 months to June 2017. The apartment market was significantly stronger than Brisbane's, with a median price rise of 5.1% to $415,000. 
 
On the Sunshine Coast, major new infrastructure projects are also driving the property market. Among them is the redevelopment of Maroochydore city centre; the expansion of the Sunshine Coast Airport; and a new business, technology and retail precinct adjacent to the University of the Sunshine Coast. 
 
According to CoreLogic, the Sunshine Coast median house price increased 5.1% to $552,000 in the 12 months to June 2017, while its median apartment price increased 3.4% to $390,000. 
 
South East Queensland remains the most compelling market in the country for both investors and young families. As the region’s value gap with Sydney and Melbourne widens, it is well positioned to take up redirected demand from the more expensive capital city markets.

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The Melbourne property market outlook

Tuesday, November 14, 2017

By John McGrath
 
In our recently released McGrath Report 2018, we discuss Melbourne’s rising appeal as both an investment hot spot and attractive alternative for Sydney owner occupiers (last week we examined the Sydney property market) who are now priced out of their home market following a phenomenal five-year boom. 

Comparatively affordable property, a strong state economy, top schools and world-renowned liveability are all factors contributing to Melbourne’s record population growth. And there is still room for future property price growth despite exceptional capital gains over the boom.

Taking a two-decade view, Melbourne’s annual compound growth rate for house prices is 8.4%, a whisker ahead of Sydney on 8.2%. Yet Melbourne is far more affordable than Sydney today, with the median house price more than $200,000 cheaper, according to CoreLogic figures.  
 
In the 12 months to June 2017, Melbourne house prices rose by a solid 9.8% to a median $675,000 and apartment prices rose by 2.0% to $500,000.
 
Outstanding value for money is helping Victoria remain the fastest growing residential population in Australia, with record numbers of new interstate and overseas residents choosing Melbourne as their home and more investors seeing better potential here.  
 
Investors are favouring Melbourne for its lower price base, growing population and buoyant economic landscape, with a state budget surplus of $1.2 billion forecast for FY2018 and $22 billion flagged for infrastructure spending.  
 
Families are also attracted by Melbourne’s affordability as well as its job prospects, high quality schools and lifestyle.
 
Job numbers in Melbourne grew by 94,100 in the year to July 2017 – more than anywhere else in Australia; and the city has been ranked the world’s most liveable for the seventh consecutive year.  
 
Schools are a big factor in Melbourne’s population and property price growth. Top public education campuses, including two in the Top 100 World University Rankings, helped attract 65,007 migrants in FY16 alone.  Many Melburnian families are willing to upsize or even downsize their homes in order to enter top secondary school catchment zones in suburbs like Balwyn, Mount Waverley and McKinnon.  
 
Stock in these suburbs is already squeezed by a trend in empty nesters and retirees opting to stay put in family homes, resulting in fierce competition for limited listings, ongoing price rises and often price ripples to adjacent suburbs.
 
For example, median house prices in Bulleen rose 13.9% in FY17 as neighbouring Balwyn North became too expensive. Buyers are also finding better value in Cheltenham over next door neighbour Black Rock. 
 
Stamp duty exemptions for first home purchases up to $600,000 and concessions up to $750,000 are encouraging first home buyers back into the market.
 
Hot spots include Hoppers Crossing and Werribee in the west, Craigieburn in the north and Pakenham and Clyde in the outer south east. Young buyers on the city fringe will be encouraged by 17 new suburbs offering 100,000 rezoned lots to be released by the end of 2018. 
 
Demand for Melbourne’s trophy homes is red hot. The city’s record house price reached $40 million in August 2017 when the Toorak home of Mirvac director, Marina Darling sold to a Chinese buyer, smashing the previous record of $26.25 million set in December 2016. 
 
Melbourne CBD is now the most densely populated region of Australia with 37,754 residents living within 2.4km2. The CBD is most attractive to Chinese buyers, local downsizers and students, and while an oversupply of new apartments is softening prices, it is also creating some opportunity for savvy buyers with a long-term view. 
 
Victoria remains the most popular state for foreign investors, attracting 43% of residential real estate applications worth $28.06 billion, compared to NSW’s 32% share worth $20.65 billion, according to the Foreign Investment Review Board’s FY16 Annual Report.
 
We see an exciting future for investors who can expect strong long-term capital gains, as well as owner occupiers who can also expect great growth as they continue to enjoy living in one of the most desirable cities on the planet.

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An overview of the Sydney property market

Tuesday, November 07, 2017

By John McGrath

Sydney continues to offer one of the most appealing lifestyles of any city on the Asia-Pacific rim.

In our newly released McGrath Report, we discuss Sydney’s rising international status and how the market is finally beginning to cool, following a 66.95% surge in home values since 2012.

Sydney is receiving rising global attention and is certainly on the radar of the world’s elite for its stable economy, proximity to Asia, world class health care and education, pleasant year-round climate and endless natural beauty including its magnificent harbour, pristine beaches and clean air.

It is ranked 11th out of 40 top cities that matter most to wealthy people – behind London, New York and Hong Kong but ahead of Paris, Frankfurt and Dubai, according to Knight Frank’s City Wealth Index.

With its melting pot of cultures, Sydney continues to attract new riches from Asia, with China overtaking England as our No 1 source of immigrants over the past five years, according to the 2016 Census.

The 2017 Global Wealth Migration Review tells us that Sydney is currently the globe’s No 1 hot spot for millionaire immigrants and more of the uber-wealthy are buying second homes here, with a 29% jump to 3,500 owners in 2016 alone.

The weight of demand for residential housing has separated Sydney from the rest of Australia in terms of property values. A strong economy, rising population and chronic shortage of housing, coupled with low mortgage rates is keeping property prices rising.

We expect this to continue over the next few years albeit at a slower pace.

Sydney now has a median house price of $960,000 and a median apartment price of $717,000, according to CoreLogic-June 30, 2017.  We appear to be at, or through, the peak of the boom, with the pace of growth slowing and auction clearance rates trending down in 2017.

Key factors cooling Sydney’s market include affordability, higher mortgage rates for investors and APRA-led restrictions on investor borrowings.

The prestige market, which operates on a different cycle, is experiencing rising demand from expats, foreigners and local buyers. Top-end home prices surged 11.5% in FY17, making Sydney the world’s sixth best performing luxury home market on Knight Frank’s Prime Global Cities Index.

With prices rising, it has become tougher for young people to buy without employing non-traditional methods, such as rentvesting or using the bank of mum and dad.

In June 2017, first home buying in NSW equated to just 9% of the market, well below the long-term average of 17%, according to the ABS. However, stamp duty cuts introduced in July have had an immediate impact with 1,950 first homes financed in July, up significantly on 1,528 in June.

One of the most important NSW Government initiatives to tackle affordability is a long overdue cutting of red tape with development approvals and council re-zonings.

Target areas for new supply include Burwood, Strathfield, Canterbury, Frenchs Forest, Riverwood, Seven Hills, Crows Nest, Turrella, Wilton and Westmead, among others.

The NSW economy is firing and provides a strong fundamental for continued home price growth in Sydney, where about a quarter of Australia’s national GDP is generated and where GDP growth is at its highest since 1999-2000.

A near record $72.7 billion in new infrastructure will be spent over the next four years in NSW, including the third stage of Australia’s biggest transport project, WestConnex.

WestConnex will bring western Sydney closer to the CBD, shaving 25 minutes off the Parramatta-CBD commute – a crucial benefit given more than half of Sydney residents will live in western Sydney by 2026.

Parramatta will be at the heart of this growth with the local council predicting 22,000 new jobs and a dramatic 18% increase in the local population by 2021.

Sydney is undergoing tremendous change. A rising global buyer base is bringing a new wave of demand, crucial infrastructure for our future is finally underway and governments are working to preserve a place in our market for young people and essential service workers within the communities they serve.

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Top 5 suburb picks for greatest capital growth potential

Tuesday, October 31, 2017

By John McGrath
 
The Sydney and Melbourne property boom that has dominated the Australian real estate landscape for more than five years is over and people are now wondering what’s next for our two big cities and when will the rest of the country catch up?
 
In our just released 2018 McGrath Report, we take a look at the biggest boom winners (the suburbs with the most growth) and what’s next for Sydney and Melbourne, including all the small market trends we expect to see as these cities return to normal selling conditions.
 
We also look at some key trends across the country, including the transformation of regional hubs close to our big cities; the evolution of super apartments and residential towers incorporating retail and recreation; and the changing ways we are using our homes, including the Airbnb trend.
 
We also look at how immigration has shaped our property market and identify the dominant immigrant neighbourhoods of Sydney, Melbourne and Brisbane.
 
I’ll go into all of this in more detail over the next couple of months here on Switzer Daily. Today, let’s start with a general overview of the Australian property market and I’ll also give you my Top 5 Suburb Picks for greatest capital growth potential in each east coast capital city.
 
The most frequent question I am asked year after year is “What’s the market doing?”, which is of course impossible to answer as there isn’t one market but rather multiple markets across the country.
 
If we were to take an x-ray view of the property sector, we’d observe two main markets:  Sydney/Melbourne and Most Other Places.
 
We have seen the two big cities decouple from the rest of the country and create their own marketplaces, whilst most other regions have been rather lukewarm.  This has created a value gap that is too wide, in my view.
 
While I believe the gap is likely to close somewhat over the next few years, it will not be because of a major correction of values in Sydney and Melbourne. Rather, it will happen as other cities play catch up. But while I’m certain that Sydney and Melbourne will take a breather, I’m equally certain there is no bubble about to burst.
 
To understand why, let’s look at the main drivers of growth for these two important cities:

  1. Strong skilled worker population growth
  2. Investor appetite for bricks and mortar
  3. Ongoing overseas investment into Australia
  4. Shortage of property supply in most markets
  5. Record low interest rates

 
The key question for me is which of these factors are likely to disappear overnight? I believe that none will change dramatically over the next five years.
 
Let’s break it down to some basic tenets that in my view are beyond debate.
 
Firstly, we are fortunate to live in one of the luckiest countries in the world. We’re on the doorstep of Asia, where there is a huge appetite from middle class skilled immigrants to
relocate to Australia. Add to that $2.3 trillion of superannuation money that is looking for safe, stable returns.
 
But didn’t the recent building boom address any shortage in supply?  Well, sadly no, and it is highly unlikely to do so as population growth continues to outpace new builds.
 
And finally, will interest rates move upwards?  I’m not an economist, however my research and feeling is that whilst rates will go up in the near future, they are unlikely to return to traditional borrowing levels for some time based on global trends making the cost of money relatively cheap well into the future.
 
I hope our 2018 Market Report provides you with the necessary knowledge and insights to make informed real estate decisions.  The report can be downloaded from www.mcgrath.com.au

John McGrath’s Top Suburb Picks

SYDNEY
 
Haberfield

Over a century after her formation, this grand old dame still represents one of the best lifestyles in the country. With the new WestConnex roadway removing much of the street traffic, this great suburb is about to become even more popular.
 
Cammeray

Sometimes it’s easy to overlook the obvious, like this hot suburb. Walk to Crows Nest, Neutral Bay and Mosman villages. Even the CBD, if you like. Heritage homes and modern apartment living. What more could the savvy buyer or investor want out of one postcode?
 
Breakfast Point
Hidden in the heart of the historical inner west on the edge of the Parramatta River, this newly developed village offers an exquisite selection of residences and is only a few moments from the vibrant Majors Bay Road retail and restaurant strip.
 
Cronulla beach
With dynamic young professionals and successful empty nesters seeking to stay within ‘God’s country’, capital values for this sought-after address will continue to spiral up as far as you can see. And deservedly so. There isn’t a better lifestyle in Greater Sydney.
 
Forestville
Forestville remains one of my favourite picks for both lifestyle and value. Who said living near the CBD and beaches was out of reach? Forestville and surrounds has it all with a less hefty price tag than many of its neighbouring suburbs. But secure one here soon because Sydney’s best kept secret is fast getting out.
 
MELBOURNE
 
Pascoe Vale
Put this mid-ring sleeper with its parklands and rolling terrain on your watch list. Savvy investors are holding onto townhouses and detached dwellings for an inevitable price uplift flowing from Coburg, where comparable homes cost more. Its train station with services to Southern Cross is a boon.
 
West Footscray
Tucked beside Footscray, West Footscray benefits from its easy access to public transport, a buzzing cosmopolitan food scene and Victoria University campus. Only 7km from the city and still in the early stages of gentrification, housing prices are a steal compared to similar properties in the east.
 
Mentone

Bayside Mentone is more affordable than its neighbour Beaumaris, despite its plethora of
desirable private and public schools including Mentone Girls’ Secondary College and Mentone Grammar. Its beachside position, train station and period homes on large blocks will underpin its long term value.
 
Doncaster East
Benefitting from its proximity to Doncaster’s many shopping, commercial and academic amenities, Doncaster East is quieter with a more leafy established charm and about 5% cheaper. Only 22km to the CBD via the Eastern Freeway, professional families are vying for its spoils.
 
Chelsea
This bayside beauty still has a six-figure median house price but probably not for long. Hugging a strip of sandy beach overlooking Port Phillip Bay, it has a shopping village and metro train station. Stock remains scarce with just 88 of its 2,255 properties exchanging in FY17, according to CoreLogic figures. This means prices can only go up.
 
BRISBANE & SURROUNDS
 

Wynnum
The bayside Brisbane suburb of Wynnum offers an enviable lifestyle just 14km from the CBD. It borders the more prestigious Manly and boasts the same seaside village atmosphere without the hefty price tag, which is attracting younger professionals as well as interstate and international buyers.
 
North Lakes
Located about 25km north of Brisbane in the Moreton Bay region, North Lakes continues to
go from strength to strength with significant residential and commercial development continuing, including the $250 million Laguna mixed use development. In the decade to 2016, North Lakes-Mango Hill had the largest population increase in QLD, according to the Bureau of Statistics (ABS).
 
Coomera
The Gold Coast suburb of Coomera was the fourth fastest growing area in QLD in the 10 years to 2016, according to the ABS. Coomera will benefit from new infrastructure, including the $470 million Westfield Shopping Centre which is expected to open in late 2018.
 
Peregian Springs

Peregian Springs, a master planned community located between Mooloolaba and Noosa on the Sunshine Coast, continues to attract significant residential development, with the latest being its Ridges project. The suburb was also the second fastest growing area in QLD over the 10 years to 2016, with a population increase of 360%, according to the ABS.
 
Caloundra

The creation of the Caloundra South Priority Development Area (PDA) has reignited this suburb of the Sunshine Coast. It will become a community of 20,000 dwellings, housing approximately 50,000 people, according to the QLD Government. The first residents have moved into master planned community Aura at Caloundra South with houses also being built at the Harmony community in the suburb of Palmview.
 
CANBERRA
 
Holt
Holt is undervalued compared with neighbouring suburbs. Historical issues around social housing may be a contributor to its price lag, however recent sales evidence suggests a catch-up has already begun in this northern suburb.
 
Ngunnawal
First home buyers love the newness of Ngunnawal and its schools, shops and amenities. Ngunnawal provides a diverse range of housing options from affordable entry level townhomes to large family residences. It is close to a station on the new light rail network that begins operations in 2018.
 
Rivett
With its close proximity to shops and amenities, this family suburb is underpriced and attracting value buyers. Unrenovated three bedroom houses on blocks between 600m2 - 900m2 are very popular.
 
Phillip
Phillip is characterised by apartments and proximity to Westfield Woden. It represents great buying and will be serviced by the next stage of the light rail development.
 
Macquarie
An established suburb with real local charm, Macquarie is undergoing a rejuvenation with young families taking advantage of its larger blocks and access to arterial roads, quality schools and major Federal Government employment hubs. It offers an abundance of amenities with both the Jamison Centre and Belconnen Town Centre close by.

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Australia’s top retirement destinations

Tuesday, October 24, 2017

By John McGrath
 
What do Queenscliff Victoria, the Eurobodalla Shire New South Wales and Hinchinbrook Queensland all have in common? They’re all seaside regions, popular with tourists and they have the highest proportion of residents aged 65-plus in their respective states.

Just over 40% of the Queenscliff LGA population is aged 65-plus, according to a report from CoreLogic based on new figures from the Australian Bureau of Statistics.  Almost 30% of Eurobodalla Shire’s residents are 65 or over and in Hinchinbrook, it’s 26%.

CoreLogic’s report lists Australia’s top 50 council areas for over 65s and not surprisingly, we don’t see a single capital city area on the list. This reflects the ongoing Aussie tradition of leaving the big smoke in favour of a seachange to the coast in retirement.

Australians love the ocean so it’s not surprising that many of us want to enjoy our retirement years on the beach in a far more relaxing environment than our cities.

In most cases, there’s also the benefit of much cheaper housing in these areas compared to cities. This is a key element for retirees who are often living solely off capital such as superannuation, other savings and capital gains from selling their city residence.

Comparing median prices:

  • Queenscliff’s median house price is $768,529 compared to Melbourne’s $818,436
  • The Eurobodalla’s median is $455,656 compared to Sydney’s $1,074,552
  • Hinchinbrook’s median is $243,470 compared to Brisbane’s $527,802

In terms of the other states, the most popular retirement destination in South Australia is Victor Harbor, with just under 38% of the population aged 65-plus. In Western Australia, it is Wyalkatchem with 31.5% (although this council area has a very small population overall at just 520 people). In Tasmania, it’s Glamorgan-Spring Bay with 31% of residents aged 65-plus.

Looking at house price growth, most of these locations are not rapidly growing and this is no surprise.  Most regional areas do not have anywhere near the same market dynamics as our big cities where population growth and an undersupply of housing keeps prices rising.

For example, over the past five years Queenscliff house prices have only moved up by 5%. The Eurobodalla has had more impressive gains of 25.2% and Hinchinbrook values have actually declined by 9.5%.

But could we see a significant change in demand over coming decades?

The baby boomer generation has just begun to retire and a huge proportion of these people will want to do the traditional seachange.

The baby boomers are a huge group – we’re talking about 5.6 million people reaching retirement age between 2011 – 2031, based on ABS numbers.  It’s fair to expect that major seachange destinations already popular with retirees will benefit from an inevitable and unusually large population surge over the coming two decades.

I should note here that not all 65-year-olds are ready to retire, so it’s unfair to put them all in the one box. Many are still in the workforce and intend to stay there for a while yet. What we are seeing though is more senior executives still doing the seachange or treechange at 65-plus but without quitting their day job.

Locations such as Port Macquarie and the Blue Mountains in NSW have welcomed many new 65-plus residents over the past five years who are working from home and commuting back to Sydney once or twice a week. This is one of the reasons why improved transport links to capital cities are so important to the economies of major regional hubs.

Here are the Top 10 Most Popular Council Areas for Over 65s in Australia

  1. Queenscliff VIC – 40.3% of population aged 65-plus, median house price $768,529
  2. Victor Harbor SA – 37.7% of population aged 65-plus, median house price $371,204
  3. Barunga West SA – 32.9% of population aged 65-plus, median house price $284,881
  4. Wyalkatchem, WA – 31.5% of population aged 65-plus, median house price SNR
  5. Yorke Peninsula, SA – 31.3% of population aged 65-plus, median house price $254,347
  6. Glamorgan-Spring Bay, TAS – 31% of population aged 65-plus, median house SNR
  7. Eurobodalla NSW – 29.4% of population aged 65-plus, median house price $455,656
  8. Mid-Coast NSW – 29% of population aged 65-plus, median house price $482,066
  9. Tasman TAS – 28.8% of population aged 65-plus, median house price $252,200
  10. Quairading, WA – 28.2% of population aged 65-plus, median house price $210,196

Source: CoreLogic, ABS. *SNR – Statistically not reliable

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Time to take stock of housing debt

Tuesday, October 17, 2017

By John McGrath

We’ve been hearing a lot about record household debt in Australia, however statistics show that the bulk of this debt relates to housing and importantly, the value of our properties far outweighs that of our debt.

For the number crunchers out there, CoreLogic has provided an analysis of the Reserve Bank’s latest quarterly report on household finances. The key statistics are as follows:

  • The ratio of household debt to disposable income was 193.7% at the end of June – a record high
  • The ratio of housing debt to disposable income was 136.4%
  • The ratio of household assets to disposable income was 935.6% – a record high
  • The ratio of housing assets to disposable income was 516.5% – a record high
  • The ratio of household debt to assets was 20.7%
  • The ratio of housing debt to assets was 26.4%

What does this all mean? Basically, we’ve got a lot of debt but most of it is due to housing. Property is a stable and reliable asset class, so as long as unemployment remains low, I don’t believe there’s a doomsday scenario in terms of our record household debt.

However, every now and then we do need to think about our debt and how we’re managing it. This is especially important because of the size of our debt and the inevitability of interest rates rising, though they have a long way to go given we’re still at record low levels. On top of this, the property markets in Sydney and Melbourne are cooling, which means asset values are going to stabilize while interest rates are likely to rise (either via the banks independently or via the RBA).

This can make people nervous – not so much owner-occupiers but certainly investors. They’re the most volatile group of property owners and given the enormous number that entered the market during the boom in Sydney and Melbourne, I think it’s important for investors to take stock of their financial situation and be comfortable with their position.

Over the past few years, Sydney and Melbourne investors have been focused on the excitement of rapid capital growth and that’s entirely understandable. However, we’re now heading towards normal market conditions with little or no further growth expected for the next few years.

To be successful in property investment, you have to stay in the market long term and many Australians in my view can be too speculative. Most Australian property investors only have one investment property and they usually sell it too early. This often happens when the market is flat and interest rates go up. Smart investors ride it out. Nervous or uninformed investors sell and usually regret it.

Now’s the time to prepare yourself for the market change. You need to get yourself into a position where you’re paying the lowest interest rate you possibly can, on the terms that suit your future goals, so you can comfortably hold your asset through the flatter period of growth that’s coming.

The top two considerations for investors today are whether your loan is structured correctly for the long term; and whether you are making the best possible use of today’s low interest rates.

Remember – if you’re planning to hold your investment property for 20 years (great idea), then you’re going to be paying interest at varying rates during this time. The long term average is 7-7.5% but today you can lock in a fixed loan for 5 years (a quarter of your hold period) at 5%. Is this worth considering?

Most investors begin their journey with an interest only investment loan. Did you know you’re paying a premium for that right now? Due to APRA restrictions, banks are charging higher rates on investment loans than home loans and higher rates for interest only terms.

So, what can you do?

There are a couple of options.

If you’re on interest only, is it worth considering switching to principal and interest (P & I)? Your repayments will be higher because you’re paying off principal as well as interest (and principal payments are not tax deductible) but if your goal is to pay off the loan, would it be beneficial to go P & I for a few years while interest rates are this low?

I randomly picked a bank and looked at their rates online. On a variable interest only investment loan, they’re charging 5.35%. On a variable P & I investment loan, they’re charging 4.90%.

Next option. If you’re paying a variable rate, is it worth considering fixing? Right now, fixed rates are generally lower than variable rates. I picked a different bank and they’re charging 5.42% on variable interest only investment loans but also offering fixed interest only loans at 4.49% for 3 years or 5.09% for 5 years.

Deciding how to structure your loan is a very individual decision and I’m not recommending one strategy over another. However, I do advise every investor (and every home owner for that matter) to review their loan now with their accountant or financial advisor’s help – especially if it’s a few years old; and see if there’s a way to get a better deal.

If you’d like some advice with this, I recommend contacting McGrath’s mortgage broking division, Oxygen Home Loans for a Home Loan Health Check on 1300 855 699.

Given the bulk of our record household debt relates to housing, it’s critical to monitor the rates you’re paying and a lot has changed with lending products of late, so I recommend being fully informed of your options.

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Spring property so far

Tuesday, October 10, 2017

By John McGrath

The best way to gauge how a market is doing is by looking at auction clearance rates. They give us a real time perspective on how buyers are feeling and whether vendors are meeting the market and being realistic on price.  
 
Over the five Saturdays in September – the first month of Spring selling, we saw auction clearance rates in Sydney dip into the late 60% bracket and stay there. The lowest they got to was 66.5% over the long weekend, according to CoreLogic data.
 
So, what does this tell us?
 
First of all, clearance rates are falling but not rapidly. We’re down about 10% compared to six months ago and this is perfectly normal for a cooling market.
 
Secondly, a 60% clearance rate indicates normal market conditions and this doesn’t concern me, particularly with respect to Sydney.  We’ve had a very long sustained boom period and now we need the market to calm down and consolidate its price growth.
 
Auction clearance rates include properties sold prior to auction and we’re seeing this happen more often now due to softening buyer demand.
 
We expected cooler market conditions to be a catalyst for increased listings. Vendors are seeing that the market has peaked and now is the time to sell for maximum value. Plus, with more stock on the market, they’re no longer feeling the concern they had last year about their ability to buy back in. This appears to be happening with SQM Research reporting a 12.3% increase in listings for sale in Sydney this September compared to September 2016. This was the greatest increase in listings of any capital city.
 
In terms of price changes this Spring, we haven’t seen anything dramatic. Demand has waned a bit and buyers are certainly more selective – they have a bit more choice and don’t want to pay a premium in a slowing market. But so far, we’ve only seen an 0.3% decline in Sydney’s median house price in September and that’s nothing to be concerned about at all.
 
Let’s look at how the median house price has changed in 2017. CoreLogic reports Sydney’s median house price every month and as you can see below, it has jumped around a bit this year – gaining in some months, losing ground in other months. These fluctuations are typical at this point in the cycle.  
 
Monthly changes in Sydney’s median house price 2017
 
January + 0.5%
February +2.7%
March +1.6%
April +0.2%
May -1.0%
June + 1.8%
July +1.3%
August -0.1%
September -0.3%
 
All in all, Sydney is holding up very well as it makes the transition from boom growth to normal growth. There is still the possibility of a minor price correction, especially if interest rates escalate significantly but this is unlikely.
 
However, it is worth noting that the banks are continuing to raise mortgage rates independently of the RBA and this is prompting some investors to sell. However, I think most investors would be better off keeping their assets and fixing their loans instead if they’re concerned about rising costs.
 
Many fixed rates are cheaper than variable at the moment – we’re talking mid-4% for three years and early 5% for five years on interest only. However, always talk to a broker first before making this sort of change.

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