The biggest twits in real estate are the people waiting for the trough.
Many tell me they’re not going to act until “the market bottoms”. I ask how they think they’ll be able to identify the bottom when it arrives. They don’t have an answer.
Primarily, I think, they’re waiting to read about it in a newspaper.
Here’s the problem. There’s nobody writing for newspapers with sufficient expertise to know a trough from a peak.
Here’s another. By the time journalists start writing about the market bottoming, after receiving a press release from an attention-seeker, it will be too late. It will have occurred six months earlier.
And here’s the biggest problem. While people have been scratching their bottom waiting to pick the bottom, the bottom has already happened. In many key markets, it’s already part of history.
It may not feel so for some people, but 2012 has been a much better year in real estate than last year. Darwin and Perth have had huge rental increases and prices have started to follow. The bottom has long since passed in those two cities.
The latest figures for Sydney and Brisbane also indicate the declines of 2011 and early 2012 have been arrested, and those markets are also moving forward.
Around Australia, many regional markets have left their troughs in the distant past and have had strong growth years in 2012. There are dozens where prices grew 5% or more in the past 12 months.
The trough-seekers have been piling into markets like Gladstone this year, having missed the trough which happened two to three years ago.
As I wrote in a Property Observer column earlier this month, it doesn’t get any better than this for property buyers. All the indicators – including rising sales activity, increased lending levels, improved clearance rates, six interest rate reductions and seven consecutive quarters of improved affordability – declare that now is the moment.
So, following an improved 2012, next year will be better again. I’m expecting growth in all the capital cities except Melbourne (Hobart I’m not sure about – weak economic fundamentals may be counter-balanced by the advancement of key construction projects and state government spending packages).
The regions will again provide the most upside for property investors. Many regional towns and cities have been solid in 2012 and some have been very strong. There will be more growth markets in 2013 than this year.
It’s important to pick the right ones. The key factors to look for include diverse economies, proactive local councils, spending on infrastructure and expansion of jobs-creating businesses.
The best capital growth will be found in those that experienced significant rental growth in 2012, but not the same level of price growth – yet.
Most likely these will be regional areas touched by the resources sector but not dependent on it. Toowoomba in Queensland and Tamworth in NSW provide a couple of pertinent examples. These places have been important, prosperous regional centres long-term but have an additional powerful element to their economies with the emergence of resources activity in their area of influence.
These are safe places to invest – you’re getting the benefit of the mining sector without the risk of buying in a mining town.
So here’s the best tip for getting the best out of 2013: get busy now. Don’t be a herd animal. Most investors follow the pack and end up like pigs feeding at the trough, in a shambolic frenzy – except, it’s not a trough any more. By the top everyone’s gorging themselves, it’s well on the way to the peak – or has already passed it.
For more, watch Terry's free webinar Regions vs capital cities: Where to invest in 2013