From bust to golden triangle: the residential market’s split personality

    Experts are predicting that in only two years first home buyers in the market for an inner-city apartment will be getting revenge on their currently cashed up SMSF and investor competitors.

    Everyone from the Barefoot Investor[1] to BIS Shrapnel[2] are boldly stating that by 2018 there will be an oversupply of inner-city apartments. That’s a frightening thought for those relying on their property investments to fund their retirement.

    ABC News quoted BIS Shrapnel associate director, Kim Hawtrey as saying, “The record breaking home building boom that we’ve been seeing, we see it peaking in 2015 and some key markets are set to move into oversupply.”[3]

    But the doom and gloom doesn’t stop there: over the past year rental yields have dropped in every capital city except Adelaide (where they remained consistent) and are showing no signs of recovering[4].

    Yet the dismal yield and continued warnings of oversupply has not whetted Australia’s appetite for investing in residential real estate. Business Spectator reported that at the end of April 2015 two listed companies alone – Lend Lease and Mirvac Group – held pre-sale contracts valued at approximately $3.6 billion and $1.6 billion respectively– a total of $5.2 billion.  Just two years ago, their combined pre-sales stood at around $500 million[5].

    When combined these figures reflect the experts’ prediction: the market for inner-city apartments is red-hot right now and is set for a sharp correction in the medium term.

    What about the residential land market?

    There are mixed opinions on residential land investment.  Far from a two speed market – each city and state seems to be running its own race.

    South-East Queensland, where the next Trilogy Funds’ uSelect mortgage trust property is located, is broadly tipped to improve between now and 2020.

    Some property pundits are reporting that it is ripe for above average capital value growth.  Indeed, McGrath Real Estate CEO John McGrath recently dubbed the geographic zone from Caloundra to Toowoomba and down to the Gold Coast (encompassing Brisbane) as “the Golden Triangle” of real estate[6].

    A combination of factors such as new infrastructure and significant evidence of new residential projects under construction has firmed buyer confidence in this region.

    Find out more about Trilogy Funds’ new uSelect Loan, or the South-East Queensland property market at www.trilogyfunds.com.au/uselect


    Disclaimer: While every effort is made to provide accurate and complete information, Trilogy Funds Management Limited does not warrant or represent that the information in this article is free from errors or omissions or is suitable for your intended use. Subject to any terms implied by law and which cannot be excluded, Trilogy Funds Management Limited accepts no responsibility for any loss, damage, cost or expense (whether direct or indirect) incurred by you as a result of any error, omissions or misrepresentation in information. Note: All figures are in Australian dollars unless otherwise indicated. This information is issued by Trilogy Funds Management Limited (AFSL 261425) and provides general information only. It does not provide financial product advice nor is it an offer of securities. Applications may only be accepted by completing the applicable application accompanying the relevant PDS. If you require personal advice on the suitability or other aspect of this investment, consult a licensed adviser, who will conduct an analysis based on your circumstances. Past performance is not a reliable indicator of future performance.

    [1] Barefoot Investor, An open letter to the young people of Australia, August 2015

    [2] ABC News, Australia set for housing oversupply by 2018, July 2015

    [3] ABC News, Australia set for housing oversupply by 2018, July 2015

    [4] CoreLogic RP Data, Rental rates showing little signs of increasing, November 2015

    [5] Business Spectator, Apartment boom reaching new heights, August 2015

    [6] www.realestate.com.au, What’s inside the golden triangle? August, 2015

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