That’s a question people are asking now that our real estate markets seem to be bottoming out.
It wasn’t that long ago that the media was predicting housing market Armageddon, but the property pessimists have been proven wrong and as green shoots are appearing it looks like we’re reaching the bottom of the property cycle.
Having said that, this has been the longest and deepest property downturn in modern history.
While the combined capital city market values are down just over 10% from their peak, Sydney property values have fallen 14.9% and Melbourne property values 11.1% from their peaks around two years ago.
The languishing Perth and Darwin property markets have fallen considerably more since their peaks after the mining boom.
Source: Corelogic July 2019
So what’s ahead?
Economist Trent Wiltshire forecasts that property prices are likely to stabilise in Australia’s capital cities by the end of the year and will then exhibit moderate growth in 2020 in Domain’s mid year property report.
House price forecasts
|2019 (six-month change)||2020 (annual change)|
|Australia (combined capital cities)||1%||2% to 4%|
|Sydney||2%||3% to 5%|
|Melbourne||1%||1% to 3%|
|Brisbane||1%||3% to 5%|
|Perth||0%||0% to 2%|
|Adelaide||1%||1% to 3%|
|Hobart||0%||2% to 4%|
|Canberra||2%||4% to 6%|
Unit price forecasts
|2019 (six-month change)||2020 (annual change)|
|Australia (combined capital cities)||1%||1% to 3%|
|Sydney||2%||2% to 4%|
|Melbourne||1%||0% to 2%|
|Brisbane||0%||0% to 2%|
|Perth||0%||0% to 2%|
|Adelaide||2%||1% to 3%|
|Hobart||2%||3% to 5%|
|Canberra||1%||1% to 3%|
Our research at Metropole suggests that prices are likely to fall little further in the coming months, but the rate of house price decline is easing.
Interest rates are falling, consumer confidence is rising, there is certainty in our government and taxation system, and the banks are starting to loosen the screws and lend a bit more.
This has meant more people are applying for home loans, more people are coming to open for inspections and vendors who have sat on the sideline waiting for the market to turn our gaining confidence as auction clearance rates are rising( although on low numbers).
We are watching for days on market (how long it takes a bend or to sell their home) to drop and vendors discounting (how much a vendors needs to discount their asking price to affect a fast sale) to drop, as well as more properties available on the market for sale before we are prepared to call a market bottom.
Even though our economy is languishing, strong population growth (Treasury is forecasting 1.75%) at a time when the recent construction boom is slowing and building approvals for new construction are down 20% on a year ago suggests that the current oversupply of dwellings will soon be soaked up in the market cycle will move on.
Sydney Property Market Forecast
After experiencing the largest correction in house prices in the last three decades, Domain economist Trent Wiltshire expects that Sydney price falls will end later this year with values being around 2% higher by the end of the year and values will continue to rise into 2020.
The fact that Days on Market and Vendor Discounting is dropping and auction clearance rates are rising are all positive signs for Sydney property market
So is the fact that first home buyers interest is increasing with 25% of home loans approved in NSW in March going to first-time buyers.
However some segments of the Sydney property market are likely to fall considerably more than that average this year (we’re looking at you off the plan properties and new apartments), while some segments of the market are holding their own.
Investors are abandoning the off the plan apartment sectors and many of those who purchased off the plan a few years ago are now having trouble settling with valuations coming in on completion at well below contract price at a time when banks are more reluctant to lend on these properties.
But in the background strong economic growth and jobs creation is leading to population growth and ongoing demand for property in Sydney.
At the same time international interest from tourists and migrants continues.
Sydney is currently offering investors an opportunity to buy established apartments in the eastern suburbs, lower north shore and inner west in a “buyer’s market” with little further downside and the prospect of the market moving forward again in late 2019 or early 2020.
It is a great countercyclical time to look at buying an investment grade property in Sydney
Melbourne Property Market Forecast
Melbourne house prices have fallen 11% and the value of Melbourne Apartments has dropped 8% since their peak, but Domain economist Trent Wiltshire forecasts that house and unit prices will increase by one per cent between June and December 2019 and in 2020, house prices will grow by 1 to 3 per cent and unit prices by 0 to 2 per cent.
But the Melbourne property market is very fragmented, with property prices in some areas already picking up considerably.
The resilience across the apartment sector, despite higher supply levels, probably comes back to a combination of affordability constraints in the market as well as more first home buyers supporting housing demand across the lower price points of the market, thanks to the First Home Owner incentives.
At Metropole we’re finding the Melbourne property market is regaining its confidence and the underlying fundamental growth drivers remain strong.
For example auction clearance rates are rising, albeit on much smaller volumes.
Overall property values will be underpinned by a robust economy, jobs growth Australia’s strongest population growth and the influx of 35% of all overseas migrants.
Remember…Melbourne rates as one of the 10 fastest growing large cities in the developed world, with its population likely to increase by around 10% in the next 4 years.
If you’d like to know a bit more about how to find investment grade properties in Melbourne please in the balance of this year give the Metropole Melbourne team a call on 1300 METROPOLE or click here and leave your details.
Brisbane Property Market Forecast
Domain economist Trent Wiltshire forecasts that Brisbane house and unit prices will bottom out in the next six months and house prices will start rising, hile the value of apartments will remain flat for a while.
However Brisbane house prices are expected to grow by 3 to 5 per cent next year
With migration rates lifting, supply under control and generally healthy levels of housing affordability, the Brisbane housing market fundamentals are looking healthier compared to most other capital cities.
At the same time the underlying strong demand from home buyers and investors from the southern States at a time when yields are attractive and housing affordability is relatively healthy and putting a floor under property prices.
Brisbane’s economy is being underpinned by major projects like Queen’s Wharf, HS Wharf, TradeCoast, Cross River Rail, the second airport runway and the Adani Coal Mine, but jobs growth from these won’t really kick off for a few more years.
Our Metropole Brisbane team has noticed a significant increase in local consumer confidence with many more homebuyers and investors showing interest in property.
At the same time we are getting more enquiries from interstate investors there we have for many, many years.
Canberra Property Market Forecast
Domain forecasts Canberra house prices to increase by 2 per cent and unit prices to increase by one per cent over the balance of this year and in 2020, they predict stronger house price growth of 4 to 6 per cent and modest unit price growth of one to 3 per cent.
This will make Canberra Australia’s strongest housing market in 2020, underpinned by strong population growth and low unemployment.
However the ongoing high level of new apartment building (unit, apartment and townhouse approvals over the past 12 months are 30 per cent higher than in the previous year) will keep unit prices from rising.
Perth Property Market Forecast
Perth property values have been falling for five years since mid-2014, but domain expects prices to bottom out over the next six months and forecasts a gradual increase in home and apartment values in 2020.
However it will take a long time for market sentiment to pick up in the Western Australian capital.
One of the positive factors for Perth will be rising population growth – forecast to be 1.5% in 2020, up from 0.9% in 2018.
Hobart Property Market Forecast
Hobart has been the best performing property market in the last three years, but it looks like the boom is now over.
Hobart house and unit prices increased by around 40 per cent over the past three years, but so far in 2019 prices have flatlined.
In 2020, Domain forecast house price growth of 2 to 4 per cent and price growth of 3 to 5 per cent for units.
Adelaide Property Market Forecast
Domain forecasts ongoing modest property price growth in Adelaide over the balance of this year, with house prices expected to increase by one per cent and unit prices forecast to grow by 2 per cent.
In 2020 they predict property price growth of 1 to 3 per cent.
Adelaide house prices have risen steadily at about 3 per cent per year in recent years (units have grown at about 2 per cent annually), although prices have stabilised in 2019.
WHAT CAN YOU DO TO STAY AHEAD IN THE CURRENT MARKET?
As signs point to great countercyclical buying opportunities in the coming months, independent professional advice and careful consideration will be as important as ever in navigating Australia’s varied market conditions.
If you’re looking for independent advice, no one can help you quite like the independent property investment strategists at Metropole.
Remember the multi award winning team of property investment strategists at Metropole have no properties 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 METROPOLE.
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