Expert predictions for the autumn property market
Going into autumn, the question on everyone’s mind is how the Banking Royal Commission will affect home loans and Australians’ ability to borrow enough to get a foot on the property ladder.
In my opinion, all the adjustments that were going to be made have now already been made, and overall, it won’t get any more difficult to get a home loan this property season than it currently is. If anything, it might get a little bit easier as banks start to loosen up the lending criteria again and rates decrease over the next few months.
The looming national election may hold some potential purchasers back, however, as is traditionally the case. There may be a wait-and-see approach to see if Labor gets in and makes the proposed negative gearing changes they have announced.
But even if they do, I don’t think anything will change until mid-2020. We could potentially have a mini boom later in the year as buyers attempt to retain the negative gearing benefits before the rules change.
Sydney will probably do better than expected. So far, clearance rates are stronger — in the 60% range, which is a big improvement from last year. Vendors are now meeting the market and are willing to sell properties, and when that happens prices usually don’t drop much further. At the moment, properties are selling for at least what they did last year, if not more.
Melbourne prices haven’t dropped that much from last year, but I still think they could go further. Sydney is a little bit further down the cycle than Melbourne, and if its northern neighbour is anything to go by, there should be further drops before the Melbourne market settles again.
That said, Melbourne should be a pretty double-tiered market this year. It’s really doing quite well in the first home owners segment thanks to affordable house prices, but not as good in the high price bracket segment, where upgraders might be struggling with the dropping market.
Brisbane seems to be flatlining — it hasn’t gone up much in the past year, but it also hasn’t dropped drastically. I think we’ll see more of the same, perhaps a 1 or 2% increase in the next few months. Selling activity seems to be quite stable and major drops of the kind that we had in the other Eastern Seaboard capitals are unlikely.
Adelaide was a strong performer last year. Generally it’s a slow and steady market, increasing at about 3-4% a year, but it seems to have picked up some momentum at the moment. We can attribute this to a few things, like its relative affordability and the fact that investors - especially ones from the Eastern Seaboard - have recognised they want to invest in a market that doesn’t go up by 15% and then drop 10%. I expect the autumn season to be very good for Adelaide.
Hobart saw a 12% increase last year, so it was obviously the star performer. I predicted that it would start to slow down but it hasn’t yet. It’s still increasing and will probably continue to do so well throughout autumn. This growth is largely underpinned by very low vacancy rates, which are basically under 1%. So you’re getting a lot of demand from tenants and not enough places to go around, making Hobart a hotspot for investors.
I think that by winter to the third quarter of 2019 we’ll see a slowdown in Hobart, simply because it’s due. And usually when places like Hobart drop off, they drop off for quite a long time, because they don’t have as much immigration bolstering the population as places like Sydney and Melbourne might have.
The consensus seems to be that Perth has reached the bottom, though it’s technically still in flatline mode. Potentially, we could start to see the first few signs of recovery and growth in autumn for Perth, so hopefully it will be a positive market for them this year.
Canberra’s has been a good market in the last few years, especially for investors, because vacancy rates are so low. You get a lot of transient employees, like government employees that live in the area only on a casual basis, say, for a few months or a few years. I consider Canberra a growing market, and we should see a few percentage increases in the autumn season.
Overall, we’ve seen some interesting rates from Westpac and other big lenders. Interest only investment, which was obviously on the nose before, seems to be a lot lower than it has been for a long time. So I think there is an appetite for lending, especially to investors, and that will help the market. There’s also the chance of a rate cut in May which will help by keeping rates from increasing again.
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