It’s that time of the year – time for property predictions for 2015.
Here’s one that will come as no real surprise:
According to Saul Eslake, Merrill Lynch’s chief economist, “House price growth in Australia appears set to decelerate markedly in 2015 with challenging economic conditions.”
The weakening house price growth follows soft wages growth, low sentiment, rising unemployment, deteriorating affordability and as the impact of low interest rates fades.
Business Insider reported Eslake as saying:
“We expect only very modest dwelling price growth in 2015 with downside risks in 2016 as interest rates move higher,”
Are our property markets undervalued?
However for someone who has previously suggested our markets are already over-inflated, Eslake seemingly did a 360 recently, on the back of new evidence that our property markets may actually be undervalued.
He released a chart earlier this month that indicates the overall median house price in Australia is actually below implied price, based on income growth and interest rates – see below.
Eslake says house prices will converge with “fair value” estimates based on household income growth and mortgage rates, as this chart shows:
Eslake suggests that with no change in interest rates house price growth will slow to at least the rate of income growth, forecast at between 3.5% and 4% in 2015.
House price growth has already slowed.
Our research and on the ground experience at Metropole shows that house price growth has slowed down in the second half of 2015 – it peaked mid year.
This has been confirmed by CoreLogic’s latest findings that overall capital city prices fell in November and they also report that growth slowed mid year:
The Bottom Line
I agree that our property markets will be weaker in 2015, but that doesn’t mean that you should hold off investing in real estate.
You are not buying “the market”, but individual properties in “the market” bought at the right price so that even if property values remain flat, or fall a little, you will still have a great long-term investment.
2015 will be the year for strategic property selection, and in particular to buy properties to which you can add value through renovations or redevelopment.
It is also going to be a year to get a good team around you – 2015 will not be it to go solo and allow the market to teach you harsh lessons.
Sure I’m biased but I believe having a team like the independent property investment strategists at Metropole on your side will be a great advantage.
Remember the multi award winning team of property investment strategists at Metropole have no properties on the market to sell, so their advice is unbiased.
Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level.
Please click here to organise a time for a chat. Or call us on 1300 20 30 30.
When you attend our offices in Melbourne, Sydney or Brisbane you will receive a free copy of my latest 2 x DVD program Building Wealth through Property Investment in the new Economy valued at $49.
Subscribe & don’t miss a single episode of michael yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to michael yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.