News

Property values in hard-hit SA4s may be worth less than that of 10 years ago


Property values in hard-hit SA4s may be worth less than that of 10 years ago

PR Newswire

Broadbeach Waters, Qld., Jan. 13, 2020 /Medianet/ --

They say house prices will only go up but new research by RiskWise shows that many SA4s throughout Australia carry values BELOW what they were worth more than 10 years ago.

RiskWise Property Research CEO Doron Peleg said it was an urban legend that property prices doubled their values every seven years.

“That has been the conventional wisdom, but our research clearly shows this is not the case,” Mr Peleg said.

“We examined all 88 SA4 areas throughout Australia for both houses and units, and in 55 cases the values of either houses or units, or both, were similar, or below, their values five years ago. However, for 26 of those 55 SA4s, the values were below those of 10 years ago. In fact, for some they matched that of 19 years ago.”

 

SA4 Name

Property
Type

 Median
Price (AVM)

Similar Value Period

Bunbury, Western Australia

U

         218,447

2005

Central Queensland

U

         200,638

2006

Mackay - Isaac – Whitsunday, Queensland

U

         206,676

2006

Mandurah, Western Australia

U

         301,666

2005

Queensland - Outback

H

         139,426

2006

South Australia - Outback

U

         143,325

2003

Townsville, Queensland

U

         220,823

2004

Townsville, Queensland

H

         287,311

2006

Western Australia - Outback (North)

U

         173,049

2000

Western Australia - Outback (North)

H

         312,081

2003

Western Australia - Outback (South)

H

         223,573

2005

Western Australia - Wheat Belt

U

         177,640

2005

Source: RiskWise Property Research, CoreLogic

 

He said one example would be a house bought for $500,000 which, following the downturn in the property market, was now worth $300,000 – the same value it had 15 years ago.

“And obviously this does not take inflation into consideration, which means these are nominal terms. In other words, if you did take the inflation into consideration, of say at least 2 per cent a year, this means that it would have been far better to hold your money in the bank, and get very poor return on a no-risk deposit similar to the inflation rate (and often above), rather than taking a long-term investment in many areas of Australia,” he said.

“So, taking that into account, quite a few property investments in many areas of Australia, particularly units, have not even met inflation.”

Mr Peleg said another urban legend was that if prices reached the bottom of the market they would, consequently, deliver a sustainable solid price appreciation.

He said there was an implied expectation that even though the market might not reach a new peak, it would still deliver solid capital growth over time.

“This is not always the case as our research shows. The key drivers for price stabilisation, and later on price growth, depend on employment and population growth and in many SA4s these critical factors are still showing very negative indicators,” he said.

“In addition, it’s important to understand that even price stabilisation, or some positive price increases in a short period of time, do not necessarily mean there will be sustained price growth. For example, don’t expect the mining areas to deliver solid capital growth like that of Sydney and Melbourne as they simply don’t have the same employment and population growth rates.”

The RiskWise research shows all the SA4s where house or unit prices, or both, were the same value as that of 10 years or more ago were in Western Australia, Queensland and the Northern Territory. On the other end, there were no regional areas in Greater Sydney or Melbourne where either houses or units were worth less than that of five years ago or earlier.

“This shows us very clearly that economy is crucial when it comes to driving property prices and that proximity to employment hubs that provide sustainable employment, for example Greater Sydney and Melbourne, carries lower risk,” he said.

“It’s important to realise too that, as with many of the mining areas, there is a tangible risk in the long term if you buy properties with inflated values and that this long-term risk can be way over 10 years and, in some cases as much as 20 years.

“Unit oversupply, and/or lack of demand for units is also a factor in the major cities given we know that these dwellings are far less popular options. Brisbane is a good example, where there are no cases of houses that have decreased in value compared to 2014 and before, but four SA4s where units are now worth less than they were five years ago or earlier.

“Unsurprisingly, units that are generally less popular than houses, perform well below houses, with 35 of the SA4s throughout Australia having units with prices that are similar or less than the prices five years ago, compared to 20 SA4s for houses.

“In fact, the majority of the areas, mainly in NSW and Victoria, have current prices that are higher than the prices in 2014 and before.

He said a comprehensive analysis on region, location, suburb growth, property type and features helped identify and accurately assess the risks and the projected returns. However, poor economic growth, a weak job market and low population growth, increased the risk significantly.

Other risk factors include oversupply, high unit-to-house ratios, high vacancy rates and units unsuitable for families.

He said areas with a large number of dwellings and building approvals in the pipeline were highly likely to underperform the market and faced the trifecta of risk – settlement, equity and cashflow.

Visit www.riskwiseproperty.com.au

ENDS

For all media inquiries please contact Media & Communications Manager Vanessa Jones on 0421 057 129 or email vanessa.jones@riskwiseproperty.com.au


Back to News
Feedback