Knife’s edge or generational opportunity?

BY GARETH KENT

Director, Preston Rowe Paterson Geelong

There are many factors that can influence the performance of the property market, including economic conditions, interest rates, government policies and population growth.

I have always prescribed to the theory that the best thing about a bricks and mortar market is that it is inherently tied to the user, be that commercial or residential, and hence property investment has always been a study of people: where we live, where we are safe, where we educate, where we work, and just as importantly where we eat and play.

In recent years, the Geelong/Bellarine/Surf Coast region has experienced both strong population and property value growth and is viewed by many to be one of the most robust markets in the country.

The internal and external migration behaviours of our population, fuelled by COVID, work from home technology, the closing of borders etc, has created a very unique set of overlapping circumstances, providing us with a “generational opportunity.”

However, it is important to note that the market can also be volatile and subject to fluctuations.

In recent months, we have seen substantial declines in medium house values, the combined five state capital cities have dropped by 9.1 per cent (12 monthly change), led by Sydney down 14 per cent and Melbourne down 9.5 per cent.

Yet, despite these recent falls, property values are significantly higher today than they were pre-COVID.

We have entered a very interesting period of uncertainty and a ”wait-and-see” attitude is dominating our market throughout the first few months of 2023.

The RBA’s recent announcement of a further increase in the cash rate of 0.25 per cent certainly turns up the heat, but results from auctions throughout our region seem to defy this negative sentiment, with some strong results and a slight increase in demand in recent days.

Auction clearance rates are “steady-to-higher” while house price decline continues to level out.

Our region is a very resilient marketplace.

There is a measurable lack of listings on the market, sellers have just gone on strike across the country, but this is placing more demand on the properties that do enter the market.

Of even more impact is the tightening in the rental market, with vacancy rates in both dwellings and apartments extremely low across the region, and record rental prices continuing to be paid.

A three-bedroom, two-bathroom townhouse is now likely to cost you $650 per week in inner suburban areas of Geelong such as Geelong West, South Geelong, Newtown and Highton.

A standard four-bedroom family home in Highton will cost you circa $750 per week.

Investors should be delighted with these returns.

Add in the huge expectations around the impact of:

• The Central Geelong Framework Plan dropping at any moment, spurring a boom in building activity within Central Geelong
• The coming Commonwealth Games and the infrastructure spend required to make this a success, and
• The announcements of new developments at Avalon.

It’s my view that we are not on a knife’s edge, and that indeed, what is one person’s loss is another person’s opportunity. In our region, for some, the generational opportunity might be just around the corner.

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