Some Christmas Cheer

//Some Christmas Cheer

Christmas is a wonderful time of year. A time for family and friends and a time to be thankful for all that we have, especially in the Lucky Country. Its also a great time to spend some time thinking through our strategy for the future and ourProperty Investing business plan. As the last blog for 2010, I thought a quick look at what lies ahead might help focus some of that planning.

The general expectation for 2011 in the macro sense will be relatively quiet on the capital growth front. Two things to keep in mind here. Firstly, we’re talking the ‘Australian’ market and predominately capital cities (thus there are always opportunities in areas that are or likely to perform above the average). Secondly any successful wealth creation plan should have a long term component so its not just about 2011. A few key thoughts to bring some Christmas Cheer:
to our thought process as we plan ahead.

How did we get so Rich?

… The title of an article in the Financial Review today. As a country our wealth is increasing through, to quote the RBA, a 1:100 year event and our economy is changing. With that will come many opportunities, some of the key impacts that will affect the housing market are the ongoing demand for skilled labour migration and increasing wage pressure through a falling unemployment rate. Both good for capital growth. Slowed of course by rising rates interest rates as the RBA attempts to keep inflation under control, however consumer confidence is likely to continue to grow.

Where will all the people go?

While our rate of immigration has dropped from therecord levels of the previous two years (although some are speculating we’ll be back at that level within two years) we still have a far higher growth rate than the world average. A higher rate again in Queensland. The positive, if you’re an investor, is the expectation the undersupply of property (assessed to be just under 40,000 homes at the end of the last financial year) will increase to over 50,000 this financial year and 60,000-65,000 in FY11/12 due to a continued decline in residential building approvals. Of note, the September quarter saw the lowest number of building approvals in QLD in 23 years!

What will they have to pay?

With few new dwellings added to supply we are seeing increasing pressure on rents so while the headline capital growth figures may not excite (again, in the macro) rental growth has remained ahead of CPI in QLD and it looks like yields will continue to strengthen through 2011. So while there are still some short term growth opportunities, even at the macro level the future looks
very bright. In the interim we can look for improving yields and ensuring we not only maximise the today opportunities, we set a solid foundation to make the most of a once in a hundred year event.

Have a wonderful Christmas, an exciting New Year and a prosperous future!