Transctiption of Finance News Network interview with RP Data Head of Corporate Affairs Craig MacKenzie
Lelde Smits: Hello, I’m Lelde Smits for the Finance News Network and joining me today from Australian property data provider RP Data to discuss the outlook for Australian property over 2014 is Craig MacKenzie. Craig, welcome back to FNN.
Craig MacKenzie: Thanks Lelde, good to be here.
Lelde Smits: RP Data reports Australia’s combined capital city [home] values jumped by 8.3 per cent over the year to November [2013]. Was it a bigger or smaller jump than you were expecting?
Craig MacKenzie: Probably on the bigger side, Lelde. It was really driven by Sydney. Sydney saw a very, very strong growth in property values, particularly in the second half of 2013 with growth of about 11 per cent for that past six months of the year. So, probably on the higher side, the 8 per cent for the combined capital cities.
Lelde Smits: You mention Sydney was behind a lot of those gains. Where there any other significant drivers behind that price jump?
Craig MacKenzie: Melbourne also saw strong growth in 2013. Not to the same degree as Sydney, but again being a larger capital city it contributed strongly to that 8 per cent capital city number you mention. So, Melbourne was also on the high side, in terms of capital growth for the year. And also Perth was a strong performer, although it tailed off towards the end of the year – Perth saw growth at about 6 per cent for the year of 2013.
Lelde Smits: Moving to interest rates now - As they fell property prices rose over the year, fuelling talk that we may be in a property bubble. Do you believe we in a property bubble or even at risk of entering into one?
Craig MacKenzie: No we don’t believe we are in a bubble. That question is asked quite often, but no we don’t. We see good sustainable fundamentals in the Australian property market. At risk, certainly regulators have pointed out the risks of a low interest rate environment in people over-borrowing. We think there are very many checks and balances in the system that would prohibit the market becoming too overheated.
Lelde Smits: So with the key cash rate sitting at a record low of 2.5 per cent, where do you see it heading over the next year?
Craig MacKenzie: Interest rates, I think, we see we’re at or almost at the bottom of the cycle. Potentially I think the Reserve Bank of Australia [RBA] will sit on its hands for the first quarter of 2014 and then reassess.
Lelde Smits: And where does RP Data predict property prices will head into 2014?
Craig MacKenzie: I think to see a rate of growth of about 8-10 per cent across the combined capital cities in 2013 was particularly strong. Our expectation would be [that] it would be a more refined and measured rate of growth in 2014. Particular, partially, around the 5 per cent sort of level. That would be reflective of more measured growth in Sydney in particular which drove that higher number in 2013. There are a number of factors that feed into that more measured rate of growth for 2014.
Lelde Smits: Most capital city markets sprung into recovery mode in 2013, dominated by Melbourne and Sydney as you mention. So which cities are the best positioned to perform in 2014?
Craig MacKenzie: I think one of the best performers in 2014 is likely to be Brisbane and South East Queensland. That market has seen some modest growth over the past few years and I think now the fundamentals there is terms of population growth, housing supply and rental yields are all very strong. I think some confidence is returning to that market in particular.
Lelde Smits: And are there any interesting markets RP Data has identified which may be set to change from evolving conditions over the next year?
Craig MacKenzie: Two of the interesting markets to keep a close eye out on in 2014 will be Sydney and Melbourne. As I mention earlier, both of those markets investors have played a key role in driving the growth in 2013. As a result in the growth of values in those markets and the fact that rental prices have stayed flat we have seen declining rental yields, particularly in Sydney and Melbourne. So that will be an interesting dynamic to watch in 2014, to see the extent to which investors remain attracted to those markets.
Lelde Smits: Finally Craig, which markets will be the surest bets in 2014 and what factors may be the some wildcards for property investors?
Craig MacKenzie: Interesting the markets to watch in terms of risks will be parts of Melbourne and Adelaide, associated with the manufacturing and automotive industries which will see some pressure potentially in 2014.
The inner city apartment market in Melbourne in 2014 will be one to watch closely. We've seen some elements of over supply in that part of the market.
And, Darwin market is always an interesting one. There’s always plenty of volatility in that market, up and down. So, there’s some real dynamic happenings in the Darwin market in particular.
Lelde Smits: Craig MacKenzie, great to speak with you again and thank you for the property outlook for the year ahead.
