During the past twelve months we’ve seen some important shifts in property market conditions across Australia’s capital cities. As is often the case, past activity can help us predict future trends, and so in this article we’re not only putting the last 12 months under the microscope, but looking to the future too.
As a whole, Australia’s property market seems to be cooling. According to research from Core Logic, 2017 was the weakest calendar year for value growth since 2012. National dwelling values were down 0.3% over the three months to December 31. This is the slowest quarterly rate of growth we’ve seen since April 2016. Although Sydney remains the nation’s most expensive city, dwelling values fell over the final quarter by -2.1%, along with Darwin down -2.9%. Over the same period, growth continued in Melbourne 0.9%, Brisbane 0.3%, Adelaide 0.3%, Perth 0.1%, Hobart 3.1% and Canberra 1.0%.
Growth in the major capitals over the past 12 months has been modest – Sydney 3.1%, Melbourne 8.9%, Brisbane 2.4%, Adelaide 3.0%, Perth -2.3%, Hobart 12.3%, Darwin -6.5% and Canberra 9.6%.
In Sydney and to a lesser extent Melbourne, it appears that price growth has slowed for the time being. This can be attributed to a range of factors however a key driver of slower growth has been tighter credit policies which are changing the way investors can access funds. In particular, bank regulator APRA has imposed stricter conditions on the amount of interest-only loans banks can lend investors.
Ultimately though, past experience tells us that fluctuations in property demand and value are cyclical in nature and normal. For 2018 we’re expecting a fairly solid but unspectacular year for property. We’re likely to see lower growth rates, across previously strong markets (perhaps even slightly negative) with more cautious buyers, and ongoing regulatory interference around credit standards and investor activity.
In spite of these property headwinds, we’ve seen the Australian economy growing around 2.8% annually; interest rates are low; public and private infrastructure investment is increasing; globally the major economies are doing well and commodity prices have been improving. This bodes well for rising land prices and house prices. Therefore we think it’s a relatively good bet that average Australian property prices will increase in 2018.
Snapshot: Australia’s property market in 2018
Looking forward to a new year, there are still opportunities aplenty for investors seeking to strike gold in the Australian property market.
These three key factors will play an influential role for investors who are ready to grow investment portfolios in 2018:
A cooling market: Shrewd investors will have the chance to take advantage of plateauing or even cooling property prices in the country’s two big cities, as well as opportunities in cities better placed in their growth cycle like Brisbane.
Infrastructure boost: Planned major infrastructure projects in main cities promise to boost property values over the long term.
Low interest rates not rising in a hurry: Mortgage interest rates remain at a record low and aren’t expected to rise in the immediate future. Plenty of time to plan for future rises while enjoying the current low.
As strong advocates of responsible investing with over 10 years of experience, the Providence team can assist you in identifying the best growth opportunities that suit your budget and goals, assisting you throughout the process, from research to acquisition and more.
Get in touch with us for an obligation-free chat about increasing your portfolio (or starting one for 2018!).
Written by Lynton Stevenson, Managing Director, Providence Property Group