Strategies for a flat property market

How to win in a flat market

For the last few years making money from property has been relatively easy. Anyone, even those with little understanding of property investment, could buy almost any property in a reasonable location, and sit back as the value increased almost daily. But of course, this could not last forever. First home buyers have been forced out of the market due to decreasing affordability and many established home buyers and investors have been spooked by general economic uncertainty and more recently by rising interest rates. Others realised that 1.5% capital growth a month that some areas exhibited was not sustainable. Although the long-term trend for property prices in Australia is upwards, growth is not constant. Concerns about inflation and our fast growingeconomy and a mining boom ahead prompted the Reserve Bank to unexpectedly raise interest rates this month and put some speed bumps along the way. Before I get into the implications of a flat property market, let's have a look at where we are around Australia in property. Over the last few months Australia's housing market continued to tread water, with the latest figures from RP Data www.rpdata.com and Rismark showing house prices increased just 0.1% in September, meaning house prices have basically not risen since May. The data shows the national median city house price is $406,500, which is $9,500 lower than at the end of the June quarter. During the month to the end of September, the best-performing market was Sydney, where prices increased 0.9% during the month, compared to a rise of 0.5% in Melbourne and 0.7% in Brisbane. Prices in the under-performing Perth market dropped 1.9% in September, while prices in Darwin were down 1.1%, down 0.8% in Adelaide, and down 0.3% in Canberra. Capital city home prices are up 7.9% on a year ago while prices in regional Australia performed poorly with prices rising only 2.7%. In annual terms the RP Data reported property prices are higher than a year ago across all capital cities except Perth (down 0.3%). Leading the way is Melbourne (12.7%), followed by Canberra (up 11.3%), Darwin (up 8.2%), Sydney (up 9.3%), Adelaide (up 6%) and Brisbane (up 2.1%). What do these figures show? Well what they don't show is the segmented nature of the markets. While the market is less buoyant than earlier in the year, good properties are still selling quickly, however B and C class properties have been hit hard. It is clear that the property sector is in the midst of a consolidation

Source: Michael Yardney is the director of Metropole Property Investment Strategists