By: Rosemary Johnston- Tuesday, January 08, 2013
Successful property investment in 2013 is more challenging as rapidly changing economic drivers impact our results in the Australian property market. It is no longer enough to buy anything that looks good and hope it will go up in value over time. Most of us have much higher expectations. We want to plan our success, measure our results and know we are on track to deliver our ‘retirement’ income.
Many of us have access to benchmark data so we can compare our results and know if they are above or below average. Some of us have been disappointed in our short-term results. Others are concerned at their long-term results. Most of us want to improve the performance of our portfolio and decrease our risks.
Australia’s multispeed economy means we need to have our sights on a bigger picture than just real estate data or our sense of the appeal of the property to ensure our success. We need to identify areas that have strong economic drivers for capital growth that are on track to deliver within our time frames and risk profile.
Where do we need to look for unbiased data? The CommSec State of the States report is excellent for providing quarterly data on State and Territory average growth rates for key sectors of the economy, and where they are relative to a benchmark: their ten-year averages. Three factors stand for property investors in 2013.
Availability of Money supports economic growth through lending for expansion. This was the foundation of all post GFC Government spending as money from financial institutions dried up.
- Finance for housing is a measure of availability of funds to support investment.
Capital growth increases the value of our portfolio while its rental income supports its holding costs. Using the future increased value of our portfolio to pay down debt is the bones of a sound investment strategy.
- The imbalance of below average housing starts and above average population growth creates pressure. Limited land availability amplifies this pressure.
Confidence is the key that moves the property cycle into accelerated growth.
- Employment strength translates into a proxy measure of confidence. If we have steady employment with opportunity for increased wages most of us are willing to take more investment risk and pay more for our own home creating capital growth.
What stands out for property investors looking to be ahead of the curve? CommSec reported that NSW had the weakest benchmarked housing starts and above average population growth, and we know Sydney has limited land for release. What had changed is that the highlighted strength of NSW economy was employment, up 5% on the decade average over the last four months to July 2012. The stage is certainly set for capital growth pressures. To optimise our opportunities we need to identify what is above average within this market.
http://images.comsec.com.au/ipo/UploadedImages/statesa76d2b6bc0f84dca9b208a79a60a3590.pdf Reported in Sep for July figures