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property?
How good an investment is residential
property?
What does ANZ bank say?
The ANZ Property Outlook - January 2008 produces
the following statements and graphs. "In raw terms,
since 1984, residential property has enjoyed an extraordinary
compound annual total return of 13.4%, only slightly
below that of equities (13.8%) and far above both commercial
property (10.3%) and bonds (9.4%)."
"But in risk-adjusted terms, residential property
has delivered vastly superior returns to all other asset
classes. ...In risk-adjusted terms since 1984, residential
property returns have more than tripled those of equities
and more than doubled those of commercial property and
government bonds."
"A dramatic tightening of the housing market will
force already soaring house prices and rents sharply
higher."
Housing market balance
So where should the astute investor be looking?
Herron Todd White (HTW) is the largest independent
property valuation and advisory group in Australia,
with over 400 staff across 40 offices. They are independent
because they only conduct valuations - they neither
sell nor develop property. HTW's February 2008 "This
Month in Review" consists of a 43 page report assessing
the position of each residential region in the property
cycle, ranging from:
1. Bottom of market
2. Start of recovery
3. Rising market
4. Peak of market
5. Declining market
Investors aim to purchase in phases 2 (start of recovery)
and 3 (rising market). HTW's view is that Perth is at
the peak, but select parts of the Eastern seaboard are
in phases 2 (start of recovery) and 3 (rising market).
As indicated in previous FCC Bulletins, we believe that
certain parts of Sydney (in particular) and also parts
of south east Queensland, provide very good investment
opportunities.
The fact that Sydney is well behind the rest of Australia,
and is due for a catch up, is evident from the following
ANZ chart.
As ANZ says, "Our projections suggest a critical
and rapidly expanding shortage of housing in Sydney
will provide significant support to house prices and
rents". This is based on a number of factors including
"the vacancy rate falling to a 19 year low of 1.4%
in September" and "NSW home building approvals
have slumped to lowest level on record".
