2015 was a bumper of a year for real estate sales, so with the New Year in full swing everyone from property punters to economists are placing their bets on where prices will go in 2016.
Now it’s my turn to throw my hat in the ring. But the answer isn’t a one size fits all scenario, as every city is different and within each city every region varies. So rather than making a general prediction for prices across the entire Australian property market, I’ve narrowed it down to four of the major cities: Sydney, Melbourne, Brisbane and Perth.
Here are my predictions for 2016 property prices:
Sydney: 3-4% overall growth
I’m tipping that prices in the inner city of Sydney will perform well in 2016, however some of the outer suburbs will fall and drag down the average. So this balancing act is likely to mean there will be a slight growth of between 3-4% (no where near what we saw over 2015), which means we will be barely keeping up with inflation. While 2016 could be a good opportunity to buy as the Sydney market cools, I don’t think there is going to be the dramatic drop that people think.
Melbourne: 5-6% overall growth
By contrast, it’s likely that Melbourne’s outer suburbs will perform well next year, while inner city apartments will perform poorly due to an oversupply. The reason I’ve tipped Melbourne as having a greater growth than Sydney of 5-6%, is because Melbourne didn’t have the big boom that Sydney had over 2015, so there is room for prices to go up.
Brisbane: 8-9% overall growth
My prediction is that Brisbane will outperform both cities next year, because typically when you have a high price growth in Sydney and Melbourne (like we did in 2015) it takes a bit of time to spill over into other cities. So I’m placing my bet on Brisbane as a good investment option for people looking for areas that are going up and are likely to see capital growth. Plus an extra bonus is you don’t have to pay land tax as an investor in Brisbane.
Perth: -2% to 1%
Unfortunately, there is unlikely to be a property price lift in Perth, as it continues to struggle due to the come-off of the fading mining boom. Eventually when the dust settles, the fundamentals of Perth being a nice city with employment will likely see it bounce back. But this might not be for a while, until at least 2017 is my hunch.
RBA cash rate prediction for 2016
So those are my predictions for property prices in the New Year, but before I wrap up this blog I couldn’t help but place a bet on what the RBA will do with the cash rate in 2016.
I’m tipping there will be a rate cut before June, as the Reserve Bank of Australia attempts to stimulate spending activity. This is because we’ve got a revenue crisis – the mining boom is all but over, the residential construction boom is also beginning to fade and the budget is in the red.
It’s likely the RBA will cut 25 basis points off the current 2% cash rate or we could see it go down even further by 50 basis points if the budget continues to suffer and the banks make more rate hikes in the New Year to meet capital requirements set by APRA. However, no one knows at this stage how far the RBA could go, as they’ll have to reassess according to how the economy pans out in 2016. So watch this space…
If you’re planning on dabbling in the property market in 2016, make sure you land yourself a competitive home loan deal by comparing packages in our home loan comparison section or punch in your details below and I’ll haggle with the banks of your behalf.