Over the past 12 months property as an asset class has performed extraordinarily well. In fact, according to a recent report the annual growth rate of capital gains across the nation moved at the fastest pace since 2009. While this will cause some to celebrate, we need to remember that not all properties, or locations, are created equal.
When property prices increase while married to historically low interest rates it can create a euphoric feeling within certain pockets of our great country. But let’s leave emotion at the door for a moment and take a closer look at how different property types performed around the country during this growth period.
Collectively, large capital city markets have shown growth rates with a disparity between houses and apartments. According to the December CoreLogic Home Value Index, capital city house prices increased by 11.6%, while at the same time the value of apartments only performed half as well, increasing by 5.9%.
But lets dig deeper as certain markets tell vastly different stories. Melbourne house values increased by 15.1% over the year compared with a 1.7% rise in apartment values, while Brisbane’s housing market was 4% higher over the year, compared with apartment prices falling by -0.2%.
It’s no surprise to me that the largest disparity between these two property types lies in Melbourne and Brisbane, where as I have discussed previously, concerns surrounding apartment oversupply continues to harm confidence as it reaches a fever pitch.
This disparity of property type performance is potentially one of the most important property issues faced by investors and home buyers in many years, and exactly why I am making how to recognise and avoid these big property shifts, the focus of my upcoming investor meetings which are 100% free to attend.
As you can see, no two properties are alike and sadly previous success can create a “Midas touch” feeling… resulting in investors thinking they can do no wrong when buying property. This will create a recipe for disaster for some when the apartment oversupply in these seemingly strong markets fully takes hold of over confident buyers.
Researching the numbers gives us all the best chance of success to avoid such scenarios, so lets lift the veil back on a few other markets and regions.
The numbers tell us it wasn’t a great 12 months for all with Perth sustaining a decline in house prices of -4.3% and Sydney at the other end of the spectrum benefiting from a 15.5% increase.
Outside of capital cities regional New South Wales lead the way in capital growth with house prices enjoying an increase of 7.3%. Those who followed my advice 12 months ago and took advantage these regional markets would be quite happy indeed.
If we step back and look broadly at property as a general investment, the CoreLogic report suggests that factoring in gross rental yields as well as capital gains, housing as an asset class earned a total annual return of 14.7% based on the combined capital cities index results.
Looking back at past results can be reassuring, but it is no guarantee of future success. To learn which property types and locations will provide the best chance of investing success in the future, claim your complimentary seat at our next Investor Meeting now.