There are a lot of mixed opinions regarding the forecast for the Australian property market in 2017. One thing we do know for certain is no one can look into their crystal ball and predict the future. What we do in this article is review the economists’ forecasts and give you our thoughts.
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Forecast for the Australian property market in 2017
Let’s take a look each state and territory and see what the forecast for the Australian property market in 2017 has in store.
Hobart, the second oldest capital after Sydney is starting to show face again in the Australian housing market. The last time Hobart was at the peak of the property cycle was November 2003. Since then, it hit rock bottom with hard to read statistics, such as, record unemployment, traditional industries like forestry were in sharp decline and tourism was sluggish. After a long period of hard times, we now believe the Hobart market is firmly in the rising market phase of the property cycle.
So, why is this? The state government is performing better than the last, Infrastructure is aplenty with the Tasmanian government committing 1.8B in infrastructure projects along with many in the private sector spending up big. Tourism has played a major part in the recovery of the state with figures increasing year on year – international visitors increased by 13% while their expenditure increased by 23% (year ending June 2016). Combine an influx of job opportunities with housing affordability issues in the Sydney and Melbourne markets and we are seeing native Tasmanian’s moving back home and mainland residents migrating to the apple isle for better affordability and a somewhat more relaxed way of life. A cultural shift in remote working is allowing these residents to migrate whilst still retaining their mainland employment.
Let’s look at the figures, stock on market is taking a sharp downturn and the population is increasing, causing large supply and demand issues. Vacancy rates are the lowest in Australia at just 0.5%. In 2016, we saw houses and units gain 11.71% and 6.07% respectively.
We believe Hobart represents great buying. However, it would be a short to medium term investment in our eyes – monitoring the market closely is a must given any downturn in the market could hit hard here.
Canberra, filled with overpaid politicians and bureaucracy? Far from it we believe. Home to some of the nations best museums and a thriving food and bar scene, with a diverse mix of personalities from every demographic. Yes, that doesn’t sound like the Canberra we all know!
Recently, Canberra has struggled for a few years, with a third of the economy coming from the federal government. We saw cut backs in public and private sector jobs, essentially ending the building boom in 2014 – causing the housing market to bottom out. The good news is we firmly believe Canberra is now in a rising market. Proof of this was demonstrated in 2016, where Canberra’s asking prices did rise by 5% (houses), vacancy rates dropped from 2.0% to 1.1% (as of September 2016) and there was a 12-month capital gain in housing and units at 9.60% and 5.09% respectively. Solidifying this is unemployment remains historically low at 3.7%. On the ground open homes are jam packed and auctions hotly contested with the most recent auction clearance rates at 79% for the week-ending 19/02.
So whats caused the positive change? Now the election is over, there is confidence in the market. The loss of public sector jobs are being offset by increased private sector employment in service exports, increase in the number of international students attending local universities and growth in the tourism sector. First home buyers working in the public and private sector are also taking advantage of low interest rates and affordable detached housing. Sydney and Melbourne investors are buying up and overseas buyers are purchasing detached homes for their children attending ANU. Simply, all causing strong demand in a limited supply market.
The recently completed international airport has Singapore airlines flying direct to Singapore and New Zealand, allowing better access to Asia and Europe. Within, the city will become better connected with stage one construction of the 12km light-rail network from the city centre to the Gungahlin Corridor underway.
As the Canberra economy and housing market is so influenced by the federal government, the market should always be monitored, particularly around public sector job cut backs.
Melbourne, what’s not to love. 2016 was a boom year for Melbourne and we firmly believe this will continue into 2017. The city continues to defy all expectations with a buoyant economy, huge population growth and large infrastructure projects.
However, given the impending oversupply of apartments in Melbourne, we believe 2018 will see the market stall, if not retract. It will become a volatile market of unpredictability. The demand for housing will slow with the stock on market surpassing the demand. Melbourne is a definite sit and watch market for us. We believe Melbourne is approaching the peak of the market – a market we do not invest in.
A discussion on the forecast for the Australian property market in 2017 would not be complete without addressing what’s happening in Sydney. Sydney, continues to defy the pundits predictions, with record capital growth in 2016, we predict the same for 2017. The state is top ranked for business investment, retail trade, unemployment and economic growth, it’s second in population growth to Melbourne.
The oversupply of apartments is a huge concern with a large number of developments to complete this year and in 2018 – some economists are even overvaluing the market by 40%. Although there is still capital growth to be made in 2017, we believe this growth will either stagnate or decline in 2018 as many more new builds come on the market causing the supply and demand ratios to shift. Strong consideration should be made if looking to invest in Sydney.
Brisbane, or Brisvegas? We have identified Brisbane as being at the start of a rising market. Brisbane has been somewhat stagnate for 5-7 years now with only some regions showing growth in that period. We are however seeing regions located outside of Brisbane showing strong growth – specifically, Logan, Ipswhich and Redcliffe. Brisbane has been affected by the recent floods in 2011 and the market took a hit at that point. It has only been in very recent times that buyer confidence is back, leading us to believe it’s in the growth stage of the property cycle. However, it has been in this stage for a while now and we’re all hoping it will take off very soon and progress into a rising buoyant market.
We do have concerns with residential apartments and the rapid growth of high rise developments in the Brisbane CBD. There is an over supply in the market, with slow population growth predicted to meet the demand.
Given it’s lower average median house price within the 5-10km ring from the CBD – in comparison to Sydney and Melbourne, it does offer value and potentially greater capital growth. It’s a long term play if you’re considering investing in the Brisbane housing market and if you’re happy to be patient, there could be some fantastic rewards to those who wait.
Adelaide, the city of churches and a fairly bland property market. Nothing much happened in 2016 and we don’t predict much to happen in 2017 or in the near future. We feel it will continue to be a steady market, with small consistent gains year on year. Our lending indicators don’t point to any signs of major infrastructure or great capital growth. Unemployment is currently the highest of all capital cities at 6.8% and the economy is ranked 7th in Australia. We prefer to see more from the city before we think further about investing here. It’s a sit and watch market in our opinion.
Darwin, the top end. The last time Darwin was at the Peak of the market was in the mid 2000’s. The resource boom gripping the country saw huge infrastructure investment, population growth and a tightly held rental market, with low vacancy rates and high rents – times were good. As the resource boom slowed, so did the Darwin housing market, which has steadily declined for the past four years. We do however firmly believe, Darwin is now nearing the bottom of the market. 2017 looks to be flat for growth, however with new public and private infrastructure projects in the pipeline, they should bring employment and population growth. With the city’s housing boom behind us and a predicted growth in population, vacancy rates should lower (currently sitting at 3.2%) and housing becoming more in demand. We believe Darwin is firmly a sit and watch city and we are excited to monitor the market for potential investment in the future.
Perth, much like Darwin, is still struggling from the resource boom downturn. It’s had a number of rough years with vacancy rates at highs of 4.8% leading landlords to discount rents and offer rent free periods. Unemployment and stock listings are climbing and population growth is stalling, there is really not much else to say, we feel Perth still has some rocky roads ahead. Like Darwin, we will keep a close eye on the market in 2017, looking for better population growth and signs of a growing economy before we consider investing.
- Your Investment Property
- Herron Todd White
- Hobart Mercury
- Tourism Tasmania
- CommSec State
- SQM Housing Boom and Bust Report
- ACT Government
- Sydney Morning Herald
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Does the forecast for the Australian Property Market in 2017, inspire you to further research investing in property whilst living abroad? Here are some related articles to this story that might be of interest to you :
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