Australia’s fastest growing property economies

Australia’s fastest growing property economies
January 30, 2019 Simon Pressley

Sometimes I feel like I’m a broken record – but something vinyl and groovy of course!

I get extremely annoyed at the lack of recognition that a plethora of strong regional locations around the nation get even though they rightly deserve it. Annoyance sometimes ventures towards anger when some so-called expert pops up with yet another grossly inaccurate statement like ‘there’s no jobs there’.

The local economy in dozens of locations outside of our concrete jungles are actually performing better than many capital cities.

Just take a look at the graph below for example. It reflects job advertisement movements in parts of regional Australia and every capital city location.

Do you see anything interesting?

That’s right, on the left (see what I did there), are a bunch of regional locations where the number of employment opportunities have been soaring over the past couple years, including places like Dubbo, Geelong, the Riverina and Launceston.

On the right is our mainland capital cities.

While I’m most certainly not saying that all capital city economies are performing poorly, just look at the difference in the size of those columns on the left compared to the right.

If only our i-devices contained more of these good news stories than the glass-half-empty variety. Frustrating much!

 

What does it mean?

Put simply, if an economy is firing its community is creating jobs for people which drives local confidence. It may also lead to out-of-towners relocating for a piece of the action. Local cash registers ring louder because more people are spending more money.

As an economy continues to strengthen, the positive sentiment ultimately flows to its property market.

Think about it, can you imagine many people making a decision as important as buying a property at a time when they’re concerned about their own job security?

History has taught us that as the economy of an individual location transitions from weak to strong it generally lifts property prices.

For example, as Sydney and Melbourne’s post-GFC weak economy improved from late-2011 and in to 2012, the lift in confidence plus extra money swilling through its ecosystem played a role in its property boom.

Ditto, as Tasmania’s economy emerged from its 2010 to 2013 recession and started to gain confidence from 2014 onwards, it also led to Hobart’s property price upswing that’s still running strong to this very day.

However, vice versa when an economy weakens.

For example, when commodity prices commenced a dive from late-2012, the resultant job layoffs in cities like Brisbane, Perth and parts of regional Australia produced a downturn in their respective property markets. Some are yet to fully recover.

It’s important to understand, though, that the Australian economy generally is in as good a shape today as it has ever been for more than a decade.

The national unemployment rate is consistently trending downwards and is currently very low at five per cent.

Plus, we’ve had two consecutive years wherein the nation has created 300,000-plus jobs annually. Add to this, the Federal Budget is due to go in to surplus for first time in a decade during 2019.

The volume of jobs currently being advertised sits at an all-time record high in New South Wales, Victoria, Tasmania and the ACT and a 5-year high in Queensland, South Australia and Western Australia.

Those who continually talk doom-and-gloom clearly use a different lense to me!

Lift your gaze my friends

The thing is, I will always encourage investors to maintain an open mind to non-capital city locations because one can’t possibly make the best decision without first reviewing 100 per cent of their options.

Over the past two years, while prices in Sydney and Melbourne have been falling, parts of regional Australia have been particularly strong. And many other parts continue to strengthen!

There has been sustained improvement in sectors such regional tourism, agriculture, education, health and manufacturing. And, unless you’ve been living under a rock, everyone understands that the mining sector is once again in upswing.

Whereas data such as changes in median property prices is the rear-view mirror stuff, information pertaining to future employment provides the important clarity for the front windscreen – what us analysts refer to as a “leading indicator”.

The regional Victorian city of Geelong was one of the star property performers in 2018, with its median house price increasing by 13 per cent. While some of that growth is associated with Melbourne’s ripple, the local economy in Geelong has been strengthening for a few years. Job advertisements have increased 25 per cent over the last 2 years.

Ditto, with Launceston in northern Tasmania, where the median house price grew by 14.9 per cent last year and more to come this year. In addition to benefiting from the State’s robust economy, Launceston has a number of strings to its own bow, including an airport expansion and unprecedented investment in universities, hospitals, new hotels and CBD urban renewal.

Over the 12 months ending October 2018, Launceston’s 29.7 per cent increase in job ads was (quite literally) the highest in Australia. How do you like them apples?

The economies of other cities such as Muswellbrook, Sunshine Coast, Griffith, and Karratha have also improved significantly over the last couple of years, too, so it’s no coincidence that they were also among Australia’s best-performed property markets in 2018.

Meanwhile, other parts of Australia have recently seen strong jobs growth, which is yet to materialise into property price rises. Perhaps the economic improvement will filter through to property prices in 2019 in places like Cairns, Margaret River, Dubbo, Bairnsdale, Bunbury and Port Hedland.

Job advertisements in Dubbo in regional NSW have skyrocketed 25 per cent over the past two years. Dubbo services the Orana region – an area that is one third the size of NSW and home to 120,000 people. With its main industries being health, retail, government, education, tourism and regional agriculture, its economy is as diverse as any capital city.

In Queensland’s far north, Cairns recorded jobs ad growth of 32 per cent over two years. The major projects pipeline in Cairns is as big as anywhere and housing supply is tight.

Meanwhile, things are improving in the west as well with job ads in Margaret River jumping up 17 per cent and Perth producing the biggest increase out of the 8 capital cities.

 

Ignore the noise

You shouldn’t need me to tell you that our i-devices will be full of negativity during the first half of 2019.

We’ll have a continuation of generalists referring to a property market downturn in Sydney and Melbourne with complete disregard to potential booms in other parts of this big country. There’ll be daily updates about the Banking Royal Commission, a state election in NSW, all sorts of ill-informed ramblings about negative gearing, and federal election in May.

In context of one’s own future and financial independence, that stuff is just noise!

Looking at property market fundamentals every day I see a very long list of positives. Those positives include a strong economy, especially in places that the generalists fail to take notice of.

Job advertisements sit on the DEMAND side of the property equation. They form ONE piece of a very big puzzle.

That means that it’s not as simple as investing in a location because it’s unemployment rate might be low. Sydney, for example, currently has one of the lowest unemployment rates of any location in Australia’s history, yet the median house price has already declined by circa $150,000 over the past 18 months.

What savvy investors do, apart from working with experts, is they understand that markets respond to a number of indicators that are moving in the right direction at the same time, with job ads being just one of them.

Then they make their move before anyone has cottoned on to the potential. Did someone mention Hobart?

 

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