Property cycles are best described as clocks.
For the last three years we rapidly moved toward midnight, the heat in the market was like nothing we are likely to see again in our lifetimes.
It was as if someone was trying to wind the clock forward for daylight savings! Did we lose an hour?
Midnight came in about May last year, when the Reserve Bank made the first of 10 rate rises, lifting the cash rate by 25 basis points.
We now sit with a cash rate of 3.6 per cent, and I think the time is about 4am, dawn is nearly breaking, and as we head into winter, I think spring will bring with it a new property cycle, and the beginning of growth again.
The Australian property market has dropped by approximately 8.6 per cent from peak to trough, following a significant 26-per-cent uplift between September 2020 and April 2022.
Each state is at its own stage of the cycle and within each city and regional centre there are multiple markets with values in different locations falling, stagnant or still rising.
Geelong has only seen a drop in housing prices of approximately 3.6 per cent (Proptrack) so far in this cycle.
Of more note is the national unaffordability crisis in rental accommodation where Geelong is considered at the epicentre!
Rental affordability has fallen a record 6.8 per cent, but the Surf Coast only fell 2.5 per cent.
Rental affordability rates are now far lower in Greater Geelong than they are in Greater Melbourne.
This is pushing renters to move further out and in some instances influencing the property price decline and sheltering homeowners.
Unfortunately, home construction times are still out to 18 months, and we are unlikely to see an easing in the rental affordability issue any time soon.
Not all property markets have suffered this downturn.
The industrial market within the Geelong/Surf Coast region has seen an increase in value of some 30 per cent across the last 18 months, and an increase in rents of circa-20 per cent.
Demand for small industrial units remain strong; there is no stock available for mid-sized sheds and no stock for larger 2,000-plus sqm sheds.
The commercial office market has held its value, and its rental values, but there has been little movement in this market for nearly three years.
There is a clear divide between A and B-grade office space, compared to C and D-grade office space.
The release last week of the ”Central Geelong Framework Plan” will have a big impact on CBD offices and we are about to see the greatest building boom Geelong has ever experienced.
WE NOW HAVE ”CERTAINTY”.
This boom, with the creation of hundreds of residential apartments is likely to help our rental affordability crises, and help cannot come sooner.
I predict approximately $1.5b in private funds will be spent on construction of new buildings, and the renovation/re-purposing of old buildings over the next three years in the Geelong CBD.
It’s going to be exciting.
The pent up demand for this has never been stronger, and although most landholders and developers are only just getting their head around the very large planning document, reviews have been mostly, very positive.
The planning decisions to grant permits will be made by local council, that is great news, as state-based approvals have a history of elongated processes.
Some sites on the fringe of the CBD zoned residential are to be rezoned to “activity centre”, and will be ripe for development.
Other sites, which were predicted to allow only low heights, have been given greater potential. The CGFP will also have an impact on existing retail property, a market that has continued to have slow but sustained growth.
By all measurements, inner CBD retail in Geelong is still cheap, and why wouldn’t it be with the low rentals being achieved in mostly vacant streets.
The development of these new buildings will bring hundreds of new workers daily to the CBD.
This will be a welcome boost to CBD retail and hospitality.
And when these buildings are finished, the population of the CBD will have exploded.
The timing of this should co-inside with the Commonwealth Games, so look out.
This article written by Gareth Kent appeared in the Geelong Times on 17th March 2023.