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You know the “property market” It doesn’t exist

Don’t pay too much attention when the media talks about ‘the property market’ moving up or down – because there are actually hundreds of different property markets in Australia.

Australia has about 550 different local government areas, each of which is a separate property market.

The Bondi property market is very different to the Broome property market; the Albert Park property market is very different to the Alice Springs property market.

CoreLogic recently reported that national property prices rose 3.8% over the three months to November and 0.1% over the year. These are interesting statistics, because they give a good big-picture view. But investors should remember that these numbers refer to Australia
as a whole, not your specific properties or the location where you’re planning to invest next. So take them with a grain of salt.

By the way, the same concept applies to ‘the share market’. It doesn’t matter if the All Ordinaries jumps 20% over the year if your portfolio has gone backwards 20%.

Investors need to get really local
Just as different stocks perform in different ways, different property markets perform in different ways.

Prices and rents will always be going up in some markets and down in others.

During the national property boom that lasted from about mid-2012 to mid-2017, prices and rents actually went backwards in some suburbs. And during the recent downturn between mid-2017 to mid-2019, prices and rents actually went forwards in some suburbs.

The reason different suburbs perform differently – sometimes even when they’re next to each other – is because they have different supply and demand dynamics.

Infrastructure that is being built in Bondi will have no impact on Broome prices; an apartment block that is being erected in Albert Park will have no impact on Alice Springs prices.

The key to investing is to research the long-term fundamentals of many different markets and then pick the one that offers the best combination of current value and future growth.

In other words, investors need to forget about national statistics and get really local.