‘No brainer’ boom markets as lending conditions change

There's opportunity for this, given the banking regulator lifted its cap on interest-only lending this month.

Tasmania

Mr Pressley’s top pick for growth has Hobart, which he called a “no-brainer” with the positive impacts of the state’s economy being felt state-wide.

Launceston was picked in particular to be a top performer, followed by Burnie and Devonport.

Western Australia

Mr Pressley said investors should not be worried by the price decline of 2 per cent during 2018, as a large portion of its oversupply has been absorbed, vacancy rates have dropped by more than half to 3.3 per cent over the past two years, and new job growth is expected.

He said that Perth could be the best performing capital city in the next two to three years.

Outside of Perth, Mr Pressley identified Albany, Busselton, and Margaret River as areas to watch, which have the potential to even outperform Perth. He also mentioned Bunbury, Geraldton and the Pilbara.

“The best opportunities for the foreseeable future are in locations outside of capital cities where housing is more affordable, annual cash flows are stronger, housing supply is tight, and economic conditions are good,” he said.

“As we’ve already seen during the last couple of years, double-digit price growth will occur again in 2019 and beyond in many regional locations.”

Queensland

In addition to Western Australia, Mr Pressley expects a high level of growth from Queensland.

“We believe that Cairns and the Sunshine Coast have the best fundamentals in Queensland for 2019 but expect big improvement over the next few years from Mackay, Rockhampton, Townsville and Toowoomba,” he said.

The other capitals harmed by credit conditions

Adelaide, Canberra and Brisbane also have the potential to see growth up to 6 per cent this year, but Mr Pressley said this would only happen if lending policies were softened.

“I couldn’t rule out somewhere close to double-digit annual price growth in Brisbane and Adelaide over the next two to three years and conditions in Canberra still look solid – although steer clear of apartments,” he said.

NSW and Victoria are still facing property price growth problems in their capital cities, but favourable locations for the former include Wagga Wagga, Armidale, Tamworth, Bathurst, Muswellbrook and Parkes and the latter include Shepparton, Warrnambool, Ballarat, Bairnsdale and Bendigo.

Mr Pressley added that the state of credit resulted in a drag of 5 to 7 per cent during 2018, and that action by the banks and APRA to combat this should be taken sooner, rather than later.