As we put 2016 to bed and usher in the start of a new year it’s clear that property prices in Australia are still relatively buoyant due in part to a mix of increased investor engagement and low interest rates, plus a surge in both buying and selling confidence during the latter half of the year. So what’s in store for the property market 2017?
Sydney and Melbourne will continue to be the driving forces behind the predominately strong Australian property market, with their success spilling over and assisting smaller cities such as Hobart and Canberra. New opportunities for developers to build in fringe suburbs of Sydney such as Camden and Penrith will possibly alleviate the demand for affordable housing over the next few years, whereas in Melbourne the rapid increase in apartments may hamper it from overtaking the NSW capital when it comes to price growth. Keep your eye on Hobart in 2017, as its possible it will develop into one of the standout performers as wealthy east coast buyers with plenty of cash and limited for sale listings galvanise the market.
What about the property market 2017 as it applies to Darwin and Perth? The NT and WA capital hand have lagged behind due to underperforming local economies, a declining population and rising unemployment. This trend will continue well into the year as housing and apartment prices for both cities look like bottoming out. In the case of Adelaide, there have been slight glimmers of hope for buyers and sellers but nothing to suggest the market is set to take off in 2017.
Brisbane’s units will also take a hit with a predicted oversupply of 8,000 inner city dwellings this year and 9,000 in 20181. This surplus in combination with below average population growth could see a short term drop in prices, however experts are tipping that a undersupply of affordable housing could mitigate the overall decrease.
How will our capital cities fare against each other over the next 12 months? See below for additional information regarding the base 2017 per cent price forecast according to SQM Research2, BIS Shrapnel3 and Core Logic3.
Capital City SQM Research Price Forecast BIS Shrapnel Price Forecast Core Logic Price Forecast
Perth -8 to -4 0 to -5 -7
Brisbane +3 to +7 +2 to +3 +4
Darwin -9 to -5 0 to -5 -6
Melbourne +10 to +15 +4 to +5 +9
Sydney +11 to +16 +2 to +4 +10
Adelaide +2 to +4 0 +6
Hobart +7 to +12 +4 to +6 +8
Canberra +3 to +7 +3 to +6 +9
This forecast is of course based upon Australian interest rates remaining unchanged and the economy steady.
Oversupply will become a big issue in Brisbane, inner city Melbourne, and to a lesser extent Sydney over the next year until prices start to correct. Property Council Chief Executive Ken Morrison believes that addressing this issue now will make life easier for property owners later on in the year.
“All levels of government need to take responsibility – which is why we need a deal between the Commonwealth, states and territories to incentivise reform to fix housing supply,”
Other pundits are also speculating that if this issue isn’t addressed the country’s record breaking building boom is likely to catch up with most of our strongest performing capital cities by late 2017. Research house BIS Shrapnel estimates an extra 24,039 homes built nationwide is above what’s needed, leaving the country oversupplied for the first time in more than a decade. This could equate to the housing market cooling come late 2017, early 2018. The only exception to this trend is New South Wales, where it’s projected there will be shortage of 41,031 dwellings4. At present it’s anticipated the Sydney markets will still chug along firmly in 2017 granted job growth continues to increase and the local economy doesn’t hit any major speed humps. Melbourne should also continue to record strong price growth, although it will be concentrated in the outer suburbs, with inner city prices receding due the number of apartments being finalised.
If you’re in Darwin, Perth or even Adelaide, undersupply won’t be a concern. Dwindling populations and top-heavy stock levels in addition to downturns in the mining and manufacturing industries mean that there will be bargains. The property market overall in 2017 look increasingly bleak for these cities. Canberra and Brisbane will conversely see price growth, albeit it moderate, whereas Hobart could potentially kick off in the short term.
Low interest rates have provided a floor for housing prices across the country, after two decreases in May and August 2016. In the property market 2017 homebuyers may see their mortgages becoming more expensive, with the Reserve Bank tipped to raise the cash rate for the first time since November 2010. Any increases will however be small meaning that the cost of borrowing will remain affordable. Mortgage Choice chief executive John Flavell says that, “As a result, I would expect certain parts of the property market to remain strong”5.
Our predictions for the property market 2017? Sydney will still continue to post positive results as will Melbourne. Brisbane, Hobart and Canberra will see a marginal rise in prices, whereas those in Perth, Adelaide and Darwin should batten down the hatches and prepare for a slow year ahead.
1/2. Michael Janda, 3 November 2016, “Home prices to keep surging in Sydney, Melbourne over 2017, risk of 2018 bust: SQM Research”, (http://www.abc.net.au/news/2016-11-03/analyst-predicts-continued-home-price-surge-for-sydney-melbourne/7988778)
3. Su-Lin Tan, 27th December 2016, “2017 predictions on how Australian house prices will perform”, (http://www.afr.com/real-estate/2017-predictions-on-how-australian-house-prices-will-perform-20161212-gt92xr)
4. Jennifer Duke, 14th July 2016, “5 graphs that show why Australia’s property price growth is over”, (http://www.domain.com.au/news/five-graphs-that-show-why-australias-property-price-growth-is-over-20160713-gq5ayk/)
5. Julia Corderoy, 26th December 2016, “Gold Cost set to boom but still no end in sight for Sydney”, (http://www.news.com.au/finance/real-estate/buying/property-2107-gold-coast-set-to-boom-but-still-no-end-in-sight-for-sydney/news-story/0d10fe1f6ec94ddc1e1698eee52dc368)
6. Michelle Hele, 3rd November 2016, “Australia’s property market is overvalued and teetering on the edge of a dangerous bubble”, (http://www.news.com.au/finance/real-estate/australias-property-market-is-overvalued-and-teetering-on-the-edge-of-a-dangerous-bubble/news-story/057960a9f86cf064eca02f9a1f86eb88)
7. Carolyn Cummins, 7th December 2016, “Housing market to remain strong, but the bubble is inflating”, (http://www.smh.com.au/business/property/housing-markets-to-remain-strong-but-the-bubble-is-inflating-20161206-gt4ucn.html)
8. Ricardo Congalves, 30 December 2016, “Property 2017: Price growth moderate”, (http://www.sbs.com.au/news/article/2016/12/15/property-2017-price-growth-moderate)