2016 was quite a year in Australian property. The capital city’s median prices continued to climb, demand remained at a high nationwide, the Official Cash Rate (OCR) dropped to record lows and the construction boom continued in full swing. Where does that leave us coming in to 2017?
Many of the capital cities experienced a small price drop in late 2016, early 2017 – is that trend likely to continue? And is the OCR going to continue dropping? To keep investors, home buyers and industry professionals in the loop, we’ve compiled a few predictions for major movements in Australia’s property market this year.
Sydney and Melbourne have experienced the most remarkable price growth over the past four years, shooting them to the top of global property unaffordability rankings. New data from SQM research suggests that the show’s not over yet, and that property price increases in the two cities could increase into 2017.
The data comes from the boutique research firm’s 2017 Property Outlook Report, and suggests that Sydney’s prices could increase by between 11 and 16 per cent this year. Melbourne on the other hand is forecasted to experience price growth of between 10 and 15 per cent.
Other capital cities performing well are Brisbane and Hobart, which are expected to experience price growth of 5 per cent.
Despite the positive outlook for 2017, the report implies that 2018 will be different and that the rate of price growth could slow significantly or even reverse. In reality a slow correction in 2018 would be a positive thing for the market, representing a slow transition to affordability without quickly eroding current home owner’s equity.
With the Commonwealth Games coming up in 2018 and development back to near boom levels, the Gold Coast is looking like one of the best bets for investors in 2017. It’s also clearly popular among those looking to make the most of its positive outlook and lifestyle benefits, as government forecasts suggest that its population could almost double by 2036.
In 2017, expect high levels of migration, the resultant heightened demand, and positive economic growth to play their parts in increasing Gold Coast property prices. With all these factors in play, the Gold Coast could repeat its feat of being the fasting growing area in Queensland over 2016, when the National Australia Housing Market Report revealed it prices rose by 5.3 per cent (over 2 per cent more than Brisbane).
Whatever happens with house prices, it’s clear that the future of the seaside city is bright, and that 2017 will only improve its fortunes.
In an emphatic response to a much-decried undersupply problem, developers have built a near unprecedented number of apartments in Sydney, Melbourne and Brisbane. The numbers are massive – Housing Industry Association forecasts suggest that this year NSW, QLD and VIC will all be home to over 19,000 multi-unit/apartment starts each (most of which will be focused on capital cities).
Perhaps most impressive is the fact that almost 40,000 dwelling starts are expected in NSW and Sydney. Despite Sydney’s high level of construction, a CitiBank media release from August 2016 forecasts that Melbourne and Brisbane are at the highest risk of oversupply.
Coming into 2017 and 2018 apartment oversupply is expected to continue to increase in these two cities, and may eventually become the reality in Sydney. If this does occur, unit prices in all three cities could start falling soon – something to consider, particularly for property investors.
The Official Cash Rate is already the lowest it’s ever been since its inception, but expert commentators and media predictions suggest that the drops aren’t over yet. The National Australia Bank’s interest rate forecasts expect two drops this year – one in June and one quickly afterwards in September to bring the cash rate down to 1 per cent.
If banks pass on the cuts this could spark more price growth in property. For markets such as Sydney and Melbourne, where median prices already sit at around $1million, this could be a troublesome development.
On the other hand, rate cuts certainly aren’t a sure thing. The OECD’s Australian Economy Forecast from November suggests that monetary policy tightening is more likely and that in the near future we may see increases. This uncertainty underlines the importance of borrowing well within your means, as if interest rates do rise you’ll want to be sure that you can easily afford the change.
We certainly don’t have a crystal ball, and no one can be sure exactly what’s going to occur, but these are our best bets for 2017 in Australian property. What are your predictions?