Capital Cities #1 and Sustainable Capital Growth

By: Rosemary Johnston- Sunday, November 25, 2012

An overview of the population and housing markets of capital cities is vital to our property investment knowledge.  It supports our understanding for the comparison of opportunities.

If we add key economic, and supply and demand data that are the drivers of capital growth we have an even more robust system.  From this we can learn what is about to rise, due to increasing demand and lack of supply, and what is on the decline.  By using this information we can often precede the real estate data that is regularly published up to 6 months after its actual collection by the Valuer General’s Department in each state and territory.

Key economic, and supply and demand data that has preceded property market changes:

Investment in mining exploration has preceded the two mining economic booms in WA.  Mining exploration in Queensland is shifting now to extraction for a number of projects.  It is this phase of mining investment that has been instrumental in the extension of wealth into the broader community.  Broadening the distribution of wealth gives us investment opportunities in the lower risk major regional centres such as Townsville and Brisbane.  This is much more sustainable than investment in the high risk one economy towns that are expanding during exploration.

In comparison investment in Melbourne is subdued.  There has been a reduction in immigration into Australia that has led to reduced population growth in Melbourne.  The high value of the Australia Dollar is strangling the business prospects of the manufacturing, education and tourism sectors which are stanchions of the local economy.  Also there is an over supply of housing by a construction sector coming off the back of negative population growth for decades.  All of this has seen substantial price softening for property prices and rental returns in the outer Melbourne suburbs.

Creating greater depth in your due diligence through the inclusion of capital and rental growth drivers from sources further up the food chain than real estate statistics gives us more confidence in the property investment opportunity and its sustainable support for our investment goals.  If you need help to establish this information and consider its impact on your decisions please ask to speak to a property investment advisor.