Latest property price forecasts revealed. What’s ahead in our housing markets in the next year or two?

What’s the outlook for the Australian property markets for 2021 and beyond?

This is a common question people are asking now that our real estate markets are up and running again.

A report recently released by ANZ Bank predicts house prices at the national level will rise to a strong 17% through 2021, before slowing to 6% in 2022.

They see

  • Sydney house prices increasing by up to 19% by the end of the year
  • Melbourne house prices rising by over 16% over the year
  • Brisbane house prices rising by 16% this year
  • Adelaide house prices rising by over 13% over the year
  • Perth house prices rising a whopping 19% in 2021
  • Canberra house prices rising by over 16% in 2021, and
  • Darwin house prices rising by over 16% this year.

What a turn around from all the pessimistic forecasts all the banks made in the middle of last year.

ANZ senior economist Felicity Emmett expect the Australian Prudential Regulation Authority (APRA) would then introduce macroprudential measures to slow house price growth into 2022.Housing Price forecast ANZ

The Commonwealth Bank also upgraded its property price growth forecast for calendar year 2021 from 8 per cent to 10 per cent.

CEO Matt Comyn said before a Parliamentary hearing in Canberra.

“We expect house prices will continue to grow during the course of this calendar year and next but not at the rate that we’ve seen in February and March, which is quite a rapid,” the CEO said.

“We were thinking 8 per cent, and we are now thinking 10 per cent.

We are not overly concerned with what we are seeing at the moment in the context of broader financial stability,” he said.

Westpac is even more optimistic

Also addressing the Parliamentary hearing, Westpac’s Peter King revealed a more optimistic forecast.

“We have a forecast of 10 per cent housing prices increase for this year and next year,” Mr King said.

Another strong forecast

Christopher Joye from Coolabah Capital Investments (CCI) is predicting substantial property price growth through to the end of 2023, as well as similar gains in real residential investment.

Using the Reserve Bank of Australia’s model of the housing market, the forecast, predicts house prices growth of 8 per cent over 2021, then an additional 9 per cent in 2022, before a final spike of 8 per cent in 2023.

This takes the cumulative growth through to end-2023 up to 25 per cent.

Capital city dwelling prices rose 1.8%  over the month  of April to be 6.4 % higher year on year.

The monthly pace while still extremely strong, appears to have slowed a little from the 3-decade high of 2.8% in the month of March.

Nevertheless, the 6-month annualized growth rate has increased to 19.3%, broadly in line with the increase in purchasing power from interest rate cuts since 2019.

The slowing in prices may reflect greater purchasing power now being more fully reflected in prices.

Check out the following interactive chart which shows what’s happened to house values across the nation.

House price index May 3 2021

Source: CoreLogic April 30th, 2021

In fact, the modest coronavirus-induced housing correction came to an end in the middle of October 2020, and that our housing markets are clearly on the move again.

Resi Through Pandemic

Source: NAB and Corelogic May 10th 2021

 

 

So far this year there has been a palpable change in market sentiment on the ground and this is reflected in strong buyer activity at a time when there is a little good stock on the market.

Capital city dwelling prices rose 1.8% in April to be 6.4 % higher year on year.

The monthly pace while still extremely strong, appears to have slowed a little from the 3-decade high of 2.8% in March.

Nevertheless, the 6-month annualized growth rate has increased to 19.3%, broadly in line with the increase in purchasing power from interest rate cuts since 2019.

The slowing in prices may reflect greater purchasing power now being more fully reflected in prices.

But of course there are multiple housing markets around Australia.

Nab House Price Growth

Way back at the beginning of the pandemic Scott Morrison said he was going to build a bridge to get us across the other side, and it looks like he’s done that and it seems that we are standing on the other side now.

Fact is, 2021 is proving to be a year of economic recovery after a challenging end to 2020, and the speed of the post-COVID recovery continues to surprise all the economists.

This reflects Australia’s successful management of the health crisis alongside enormous fiscal and monetary stimulus.

ANZ now expect GDP to return to pre-COVID levels in the current quarter and see ongoing strength as the economy moves from recovery to expansion.

ANZ expects that GDP will rise 4.2% through 2021 and 2.7% through 2022.

With population growth much lower than usual, these growth rates are much stronger than trend.

ANZ expect the population to grow just 0.5% through 2021 and 0.9% through 2022, leaving their forecast per capita GDP growth at 3.6% in 2021 and 1.8% in 2022, well above the average of  0.9% recorded in the 5 years to 2019 – see the chart below.

Economic Recovery

Gdp Forecast

Employment Forecast

And our housing market has picked up considerably…

Housing Inflation

Source: NAB May 10th, 2021

What’s ahead for our property markets and the economy?

Let’s have a look at 7 property trends that I think will occur in 2021.

1. Property demand from home buyers is going to continue to be strong

Currently, home prices are surging around Australia, auction clearance rates remain high, and the media keeps reminding us we’re in a property boom.

The result is emotions are running high at the moment, with FOMO (fear of missing out) being a common theme around Australia’s property markets.

One of the leading indicators I watch carefully is finance housing approvals, and these are at record levels suggesting that more Aussies are looking at getting into property and we will have strong ongoing demand from owner-occupiers and investors as the year moves on.

It’s clear that we are now over the “recession we made ourselves have”, 93% of the jobs that disappeared during Covid have returned and consumer and business confidence is rising.

And our savings war chest will continue to fire our economy….

The Commonwealth Bank ­estimates that Australian households have put aside $120 billion more than what is normally saved in the June, September and December quarters last year — equivalent to 6 per cent of gross domestic product as overseas travel and social activities were curtailed.

The bank’s analysts believe this money will be spent over the next few years, providing continued economic momentum as a good chunk of this money will find its way into consumer spending.

Some of it will go to paying down debt and some will go into buying assets. We’re already seeing this in retail spending and in our property markets

Now, with borrowing costs lower than they ever have been, the reassurance that interest rates won’t rise for at least 3 years and increasing confidence that we’ve got this “virus thing” under control, it is likely that buyer demand will remain strong throughout the year.

In fact, this is a self-fulfilling prophecy…

As property values increase and the media reports more positively about our property markets, FOMO will mean more buyers will be keen to get in the market before it prices them out.

First Home Loan Deposit

2. Investors will squeeze out first home buyers

While currently there are many first-time buyers (FHB’s) in the market, buoyed by the many incentives being offered to them, I can see demand from FHB’s fading due to increasing competition as investors re-enter the market and property values rise.

You see…typically investors compete for similar properties to FHB’s.

Of course over the last few years, investor lending has been low, but with historically low interest rates and the prospect of easing lending restrictions, it is likely that investors will re-enter the market with a vengeance.

At the same time the federal government’s HomeBuilder scheme will disappear at the end of March.

3. Property Prices will continue to rise

While many factors affect property values, the main drivers of property price growth are consumer confidence, low interest rates, economic growth and a favourable supply and demand ratio.

trends rise house growth property marketAs always, there are multiple real estate markets around Australia, but in general property values should increase strongly throughout 2021.

However certain segments of the market will still continue to suffer, in particular in the city apartment towers and accommodation around universities.

It is unlikely these segments of the market will pick up for some time and the value of these apartments is likely to continue to fall as there just won’t be buyers for secondary properties.

At the same time, some rental market will remain challenging. In particular, the inner-city apartment markets are reliant on students, tourists (AirBNB) and overseas arrivals.

4. People will pay a premium to be in the right neighbourhood

If Coronavirus taught us anything, it was the importance of living in the right type of property in the right neighbourhood.

Australia SuburbsIn our new “Covid Normal” world, people will pay a premium for the ability to work, live and play within a 20-minute drive, bike ride or walk from home.

They will look for things such as shopping, business services, education, community facilities, recreational and sporting resources, and some jobs all within 20 minutes reach.

Residents of these neighbourhoods have now come to appreciate the ability to be out and about on the street socialising, supporting local businesses, being involved with local schools, enjoying local parks.

5. More expensive properties will outperform

The current property cycle was initially characterised by all segments of the market rising – other than inner-city high-rise apartments.

But now the high end of the market is leading the growth in property values

According to Corelogic, the high tier is the top 25% of property values in any given region.

As of February, this refers to dwelling values at around $960,000 or higher for the combined capitals, with a typical value in the high tier around $1.2 million.

Over February, the top 25% of values in the combined capital cities jumped 2.7% in value. This was up from an increase of 0.5% in January.

The middle 50% of dwelling values (the mid-tier) increased 1.5%, and the ‘low’ end of property values (the low tier) increased 1.2%.

As can be seen in the rolling quarterly growth of tiered indices across the capital cities in the chart below, the uplift at the high end of the market follows a deeper downturn during the height of COVID restrictions in 2020.

Over the course of 2020, the high tiered index had a peak-to-trough decline of -4.3%, compared to a -1.6% fall across the middle of the market, and a -0.8% fall at the low end.

The low end of the market in the capital cities can be characterised by dwelling values sitting under $497,000.

Rolling Quarterly Growth In Tiered Home Value Indices

6. 2021 will be the year of upgraders

The current property and economic environment, plus the scars left on many of us after a year of Covid related lockdowns have meant that Aussies are looking to upgrade their lifestyle.

  1. Many tenants are no longer happy to live in small dingy apartments and with an oversupply of rental units available in many areas, they are taking the opportunity to upgrade their accommodation.
  2. Other tenants who have managed to save a deposit are taking advantage of many of the many incentives available and are becoming first home buyers.
  3. With record low-interest rates and surging property markets, many existing homeowners or upgrading their accommodation to larger homes in better neighbourhoods. In fact, a recent survey suggested that one in three homeowners are looking to sell their home in the next five years.
  4. While small group homeowners are upgrading their lifestyle and moving out of the big smoke to regional Australia, more Aussies are looking to upgrade their lifestyle by moving to a better neighbourhood. As mentioned above, they love the thought that most of the things needed for a good life are just around the corner.
  5. Many Baby Boomers are looking to upgrade their accommodation by moving out of their old, tired family home into large family friendly apartments or townhouses. But they’re not looking for a sea change or tree change, they’re keen to live in “20-minute” neighbourhoods close to their family and friends.

7. We will not fall off the fiscal cliff

Some commentators were concerned that we will fall off the fiscal cliff when JobKeeper and the mortgage deferral system ended in March.

I can’t see the government allowing this to happen after having put so much time effort and money into “building a bridge to get us across the other side” as Prime Minister Scott Morrison promised.

Interest Rates SteadyAt worst, the fiscal cliff will be a little step down to the new normal.

In fact APRA (the Australian Prudential Regulatory Authority) released data showing there has been a significant fall in deferred loan repayments, yet another sign of economic recovery which boosts the ability of banks to extend lending.
Last year many borrowers put their loan repayments in deep freeze because of the uncertainty fuelled by the 2020 coronavirus pandemic.
It seems that many borrowers took out the safety net of loan deferrals but didn’t actually require them, and most have now started repaying their loans.
This means banks do not have to allow for as many potential bad dates on their books and the unofficial word is they are open for business and very keen to lend money again.
Remember bank are just “money shops”, they can’t make a profit and pay their shareholders dividends unless they lend money to customers.
And while our banks were very cautious last year, not willing to take on new loan commitments in the uncertain economic climate, their appetite for new business has definitely changed.
In fact treasurer Josh Frydenberg said:

“As more households and ­businesses resume loan repayments, banks are in an even stronger position to continue lending … helping those wanting to buy a home, invest or grow their business.”

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What’s ahead for our economy

According to Deloitte Economics Outlook released on January 18th 2021, the Australian economy is recovering, with Victoria set to lead the pack…

  • Deloitte expects Australia’s economy to rebound strongly in 2021.
  • Australia will grow by 4.4% this year, with Victoria to be the standout performer, with its economy bouncing 5.3%, chief economist Chris Richardson said.
  • Unemployment is expected to take two to three years to return to pre-pandemic levels, with weak population growth to drag.
“COVID numbers are very low, the vaccine news is excellent, confidence is rebounding, Victoria is catching up to the recovery already underway elsewhere, there are heartening developments in job markets, and China’s trade war with Australia has – so far at least – actually added to national income rather than hurt it,” chief economist Chris Richardson wrote.
Australia Growth

The Australian economy is recovering due to our relative success in suppressing the COVID-19 virus as well as the speed and size of economic stimulus and support supplied by all levels of government and the Reserve Bank.

The bad news is that Europe and the US are experiencing second waves of the virus, driving case numbers to record highs and necessitating fresh lockdowns.

The good news is that effective vaccines are set to be distributed across the globe with doses already being rolled out in the UK.

The economic outlook will clearly be dictated by the virus and how quickly the vaccines can stem case numbers and allow economies to start repairing.

After contracting an estimated 2.5 per cent in 2020, the global economy is tipped to rebound by 5.5 per cent in 2021.

On the same basis, the Australian economy is tipped to grow by 4.9 per cent in 2021 after contracting 2.8 per cent in calendar 2020.

Economy Prospect

Screen Shot 2020 12 25 At 7.16.24 Pm

  1. The Reserve Bank Governor has committed to leave the cash rate at 0.1 per cent (or even lower?) for three years. Bond purchases are being employed with the hope of reducing longer-term yields.

Long term interest rates

2. Underlying inflation is expected to broadly hold near 1-1.5 per cent over 2021.

3. Unemployment is the focal point of all monetary and fiscal policy actions. Commonwealth Bank Group economists expect that the jobless rate has peaked at 7.5 per cent.

The unemployment rate is expected to ease to 5.75 per cent by the end of 2021 and ease further to 5.0 per cent by the end of 2022.

Unemployment

While Australia’s recession is now over, the economic road back to recovery will take years.

There will continue to be some hiccups with virus case numbers in Australia, but as we move our way through 2021 we’re doing so with plenty of optimism.

4. The Westpac consumer sentiment index is at decade highs while business confidence is at 31-month highs.

Compared to prior downturns, the recovery in consumer sentiment is the sharpest seen in the history of the series and reminds us of the unusual nature of this shock and the extensive government support provided to households and businesses.

Consumer confidence February 2021

5. The success in suppressing the virus has enabled our states and territories to ‘re-open’ their economies.

6. Governments, the Reserve Bank, commercial banks, and regulators have provided all the necessary support and stimulus to ensure as many businesses as possible to stay in business and workers hold onto jobs.

7. Borrowing costs for businesses, households, and governments are at ‘rock bottom’.

8. The additional boost to confidence and future prospects comes from the prospect of a vaccine.

Overall the Australian economy is likely to rebound by 4.9 per cent after contracting 2.8 per cent in 2020.

Risks to this forecast include ‘second’ or ‘third’ waves of virus cases; setbacks with vaccines; policy mistakes on the removal of support measures; and an extended delay in the re-opening of foreign borders.

Compared to prior downturns, the recovery in consumer sentiment is the sharpest seen in the history of the series and reminds us of the unusual nature of this shock and the extensive government support provided to households and businesses.

We’re spending morecredit-card-consumer-buy-shop-confidence-economy

The major banks regularly report their internal data on credit card spending and consumer activity which has lifted strongly over the last few months in part due to the opening up of Victoria but consumer spending is also strong in other states.

Going forward, consumer spending faces headwinds from elevated unemployment, weak wages growth, tapering income support, and weak population growth.

The government recognises that consumer spending is a key driver of economic activity and that’s one of the reasons it is so keen to reduce unemployment and support our economy.

Property markets have turned the corner

When Australians feel comfortable and confident about the value of their homes, their castle, they experience a wealth effect that encourages them to spend more.

The Stock Market is Rallying

Rising stock prices are important for several reasons – they show investors are confident in the earnings and profits of the business sector and they boost the wealth of shareholders which underpins confidence and spending.

A vaccine is close 

The prospect of the imminent vaccine rollout is boosting confidence

What about house prices?

Interestingly all the bank economists agree that it is likely that all our capital cities will experience strong house price growth over the next couple of years with house prices rising 20% to 30% over this property cycle.

Of course there isn’t one Australian property market, or one Melbourne or Sydney property market so certain segments of the market will outperform.

In particular, the more affluent suburbs of our capital cities where residents have higher wages growth and more cash stashed away from the Covid pandemic are likely to outperform.

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Of course, at times like this, forecasting median house values are of little value.

Instead, one needs to get more granular to really understand what is really going on.

Each state is divided into multiple markets, by geography, price point and type of accommodation.

Each of our capital cities has an inner and near CBD property market, an inner suburban market, a group of middle ring suburbs, and outer suburban property markets.Businessman And Statistics Trend

And then there are apartments – either high-rise or medium density –  townhouses, villa units, and houses.

There are also new and establish property markets.

And each of these market segments behaves differently.

Currently, most of the property sales occurring are in the lowest price points with few discretionary sellers in the more established suburbs and higher bracket suburbs.

This means that the palette of properties currently being sold is generally in the lower price bracket and this alone will bring down reported median home values.

But this doesn’t accurately reflect the value of particular properties in any specific market, but more of the types of properties being sold.

We regularly report buyer demand as being shown by realestate.com.au’s Weekly Search Report and as you can see from the chart below, buyer demand is considerably higher than a year ago, even though this chart shows how enquiries have slowed down and we’ve moved form a “white hot market” to a “red hot” market.

Yoy Change

 

Moving forward some areas will strongly outperform others

The coronavirus pandemic has forced all Australians to reevaluate how we live our lives.Latest property price forecasts revealed. What's ahead in our housing markets in the next year or two?

Offices were shut, lockdowns were in place, and moving forward people are likely to continue working at home more than ever.

This means gone are the days where our ‘home’ was simply the place we rest our heads and enjoy some downtime between work and our social lives – the coronavirus social distancing has put an end to life as we once knew it.

If social distancing and the Covid-19 environment have taught us anything, it has taught us the importance of the neighbourhood we live in.

If you can leave your home and be within walking distance of, or a short trip to, a great shopping strip, your favourite coffee shop, amenities, the beach, a great park, the recently implemented coronavirus restrictions might seem a little more palatable than if you had none of that on your doorstep.

That’s why choosing the right neighbourhood is important for property investors?

In short, it’s all to do with capital growth, and we all know capital growth is critical for investment success, or just to create more stored wealth in the value of your home.

Sure there is always the opportunity to add value through renovating your property or making a quick buck when buying well.

But these are one off’s and won’t make a long-term difference if your property is not in the right location because you can’t change its location.

This is key because we know that 80% of a property’s performance is dependent on the location and its neighbourhood.

In fact, some locations have even outperformed others by 50-100% over the past decade.

And it’s likely that moving forward, thanks to the current environment, people will place a greater emphasis on neighbourhood and inner and middle-ring suburbs where more affluent occupants and tenants will be living.

These ‘liveable’ neighbourhoods with close amenities are where capital growth will outperform.

How do we identify these locations?

What makes some locations more desirable than others?

A lot has to do with the demographics – locations that are gentrifying and also locations that are lifestyle locations and destination locations that aspirational and affluent people want to live in will outperform.Neighbour

It’s well known that the rich do not like to travel and they are prepared to and can afford to pay for the privilege of living in lifestyle suburbs and locations with a high walk score– meaning they easy access to everything they need.

So lifestyle and destination suburbs where there is a wide range of amenities with 20 minutes walk or drive are likely to outperform in the future.

At the same time, many of these suburbs will be undergoing gentrification  – these will be suburbs where incomes are growing, which therefore increase people’s ability to afford, and pay higher prices, for property.

A good neighbourhood means different things to different people, but there are some key factors that help to determine which locations have the potential to grow in value faster in the future.

Generally, a good neighbourhood is determined on the physical location, suburb character, and its close proximity to amenities such as a shopping strip, park, coffee shops, education, and even some jobs.

It’s obvious then that in our new ‘Covid’ world, people will want to be in a location where everything they need is in a short 20-minute proximity – whether that is on public transport, bike ride or walk – to their home.

In planning circles, this concept is known as the ‘20-minute neighbourhood’.

Many inner suburbs of Australia’s capital cities and parts of their middle suburbs already meet the 20-minute neighbourhood tests, but very few outer suburbs do because there is a lower developmental density, less diversity in its community, and less access to public transport.

Supply and demand

Rising property prices are the result of two basic economic concepts: “Supply and Demand” and “Inflation”.

However, there is a sub-component of Demand, called “Capacity-to-Pay”, which is often overlooked.

Understanding how these concepts work together to affect real estate is crucial to one’s belief or doubt about whether real estate values will rise.

In a free market economy, prices of any commodity will tend to drop when supply is high and demand is low.

In other words, when there is more than enough of something, it is said to be a buyer’s market because sellers must compete, typically by lowering the price, to attract a buyer.

Conversely, when supply is low and demand is high, prices will tend to rise as buyers bid up pricing to compete for the limited supply.  This is called a “seller’s market”.

Let’s look at it this way….

  • With regard to supply…. they aren’t making any more real estate in the most desirable areas and by this, I’m talking about the dirt, not the buildings.
  • With regards to demand, Australia has a business plan to increase of population to 40,000,000 people in the next 30 years. 

For the last few decades, continued strong population growth has been a key driver supporting our property markets.

Australia’s population was growing by around 360,000 people per annum, meaning we needed to build around 170 to 180,000 new dwellings each year to accommodate all the new households.

Since 60% of our growth is dependent on immigration, in the short-term population growth will fall, but they should increase again as soon as overseas immigrants will be allowed to come to our shores.

However, more and more ex-pats are returning to Australia.

At the same time, the number of new properties listed for sale in our capital cities is falling creating an imbalance of supply and demand

Capital City Median Time

Source: Corelogic May 10th, 2021

What about affordability?

With interest rates at historic lows, housing affordability is as cheap as it ever has been.

I’m not saying the properties are cheap – they never have been if you want to live in great locations in major world-class cities.

But for those first home buyers wanting to get a foot on the property ladder, or established home buyers wanting to upgrade, or investors looking to hold onto a property, the holding costs are less than they ever have been.

And the RBA has declared that the interest rate will not increase until unemployment is back to within its preferred range of around 4.5%.

They have said this will be unlikely to occur in the next three years.

In other words, we are in unprecedented times where we don’t have to worry about rising interest rates in the foreseeable future

Of course rising property prices are an increasing issue for First Home Buyers who are not brining a “trade in” to the market.

As opposed to an established homebuyer who has a “trade in” that is increasing in value, if first home buyers wait to get into the market they’re finding the market moving faster than they can save, so they’re hopping on board the property train as quickly as they can.

First home buyer affordability has declined for the second consecutive quarter according to Dr. Andrew Wilson, reinforcing the latest ABS data that revealed first home buyer numbers – although still strong – have fallen over recent months.

First Home Buyer

House price forecasts

In the medium term, property values will be linked to the extent that our economic recovery affects income, employment, borrowing capacity, and credit availability.

However, I’m comfortable with the underlying long-term fundamentals supporting our property markets in the medium to long term.

Let’s look at a couple of them…

  • Population growth

As I said, in the short-term population growth will fall, but this should increase again as soon as overseas immigrants will be allowed to come to our shores.

Australia is likely to be seen as one of the safe haven’s in the world moving forward.

  • Declining housing supply

The oversupply of dwellings in many Australian locations is now dwindling and there are very few new large projects on the drawing board.

Considering how long it takes to build new estates or large apartment complexes, we’re going to experience an undersupply of well-located properties in our capital cities in the next year or two.

  • Interest rates are low Vacancy

The prevailing low-interest rate environment is making it easier to own a home, either as an owner-occupier or investor.

In fact, it’s never been cheaper for investors to own a property with the “net outlay” – the out-of-pocket expenses – being the lowest they’ve been for decades considering how cheap finance is today.

  • Smaller households are becoming the norm

Sure many people live in a multigenerational household, but pretty soon Millennials will make up one-third of the property market and their households tend, in general, to be smaller as are the households of the booming 65+ year old demographic.

More one and two people households mean that moving forward, we will need more dwellings for the same number of people.

  • More renters

Soon 40% of our population will be renters, partly because of affordability issues but also because of lifestyle choices.

The government isn’t providing accommodation for these people. That’s up to you and me as property investors.

  • First home buyers are back

First home buyers are back with a vengeance, in part thanks to the many incentives to encourage them, but also because of cheap finance and rising property values.

  • The underlying fundamentals are strong

Our economy recovery is unprecedented, unemployment is falling quickly as new jobs are being created.

 

Unemployment - new jobsAnd Australia’s banking system is strong, stable, and sound.

Even though a few home buyers have overcommitted themselves financially, there should be no real concern about household debt because, in general, it is in the hands of those who can afford it.

There is currently a very low rate of mortgage default of mortgage to increase.

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Sydney House Price Forecast

Sydney

Extremely strong demand for houses in Sydney’s inner and middle-ring suburbs is likely to lead to double-digit Sydney house price growth over the next 12 months.

In fact, Sydney housing values grew 8.8% in the first quarter of 2021 alone.

While well located, family-friendly apartments in Sydney’s inner suburbs are likely to perform strongly due to increasing demand from owner-occupiers and investors, apartments in high-rise towers are likely to languish.

Sydney has embraced apartment living more than any other Australian capital and family suitable apartments are seen as an affordable alternative to houses and units in popular areas such as Sydney’s eastern suburbs and Northern Beaches, where they are likely to enjoy continuing strong demand which will result in a strong increase in values.

On the other hand, apartments in high supply areas present a significant risk to property investors.

This trend already occurred prior to COVID-19 where certain areas in Sydney experienced major unit oversupply.

It seems the property investors are slowly understanding the risks associated with high-rise tower apartments in Sydney including potential construction defects, high vacancy rates, lack of scarcity, lack of capital growth, and the challenges of buying in buildings that are predominantly owned by investors, and often many overseas investors.

Real estate in Sydney’s larger regional locations, and in particular in lifestyle locations like Byron Bay, the Central Coast, the Hunter Valley, Wollongong, New South Wales south coast should perform strongly this year with beachside suburbs likely to outperform the wider overall market

The resurgence of buyer and seller interest in the Sydney property market has meant that auction clearance rates have consistently been in the high 70% – 80% range suggesting there are more buyers than there are sellers and this always leads to higher property prices

More investors are getting into the Sydney market now recognising that there are no bargains to be found and that in 12 months time the properties they purchased today will look like a bargain.

Sure there are fewer good properties for sale at the moment, and many of the good ones are for sale off-market, however, if you’d like to know a bit more about how to find these investment gems give the Metropole Sydney team a call on 1300 METROPOLE or click here and leave your details.

Sydney

Nsw Economy

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Melbourne House Price Forecast

While Melbourne house prices suffered because of its extended lockdown which severely impacted market activity in 2020, commencing in late October the Melbourne property market has rebounded strongly and is likely to deliver double digit capital growth over the next 12 months with houses outperforming apartments.

Melbourne housing values are now at new record highs having increased 5.8% in the last quarter.

Houses in regional Victoria with easy access to the capital city are also in strong demand.

Auction clearance rates in Melbourne have been very high – actually boom-time levels.

While there is a shortage of quality housing in popular areas across Melbourne, the lower-than-expected population growth has meant an oversupply of housing in some outer suburban new Estates.

A prime example of this is Melbourne’s western suburbs where an additional 18,800 houses are expected to be built over the next 24 months.

Villa units, townhouses, and family suitable apartments will be seen as affordable alternatives to houses in the highly sought-after inner eastern and south-eastern suburbs of Melbourne.

On the other hand, high-rise apartments in the many Melbourne CBD towers or close to universities are likely to underperform and keep decreasing in value.

RiskWise reports that certain apartment locations should be avoided because of the risk of oversupply.  Examples include:

  • Melbourne West with 4,267 units in the pipeline (8.4 per cent increase to the current stock),
  • Melbourne – Inner East with 4,523 units in the pipeline (7.2 per cent increase to the current stock) and
  • Melbourne – Inner with 11,579 units in the pipeline (4.7 per cent increase to the current stock).

While buyer sentiment has improved substantially, Riskwise state that the realisation of risks associated with high supply areas including price movements, construction defects, and now high vacancy rates, make these Properties, which are generally bought by investors, a higher risk endeavour.

At Metropole we’re finding that strategic investors and homebuyers looking to upgrade are actively out picking the eyes out of the market.

While overall Melbourne property values likely to increase by double digits in 2021, like all our capital cities there is not one Melbourne property market, and A-grade homes and investment-grade properties are likely to exhibit double-digit capital growth.

Sure there are fewer good properties for sale at the moment, and many of the good ones are for sale off market, however if you’d like to know a bit more about how to find these investment gems give the Metropole Melbourne team a call on 1300 METROPOLE or click here and leave your details.

Melbourne

Victorian economy

 

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 House Price Forecast

Brisbane’s house prices remained resilient over 2020 when other markets were impacted by the economic impact of COVID-19.

Now, moving forward, the Sunshine State will shine with strong demand for homes, particularly in lifestyle areas, likely to deliver double digit capital growth over the next 12 months.

Brisbane housing values have increased 5.6% over the last quarter alone

Westpac Bank recently updated its property forecasts, with Brisbane prices tipped to surge 20 per cent between 2022 and 2023.

Increased demand for Brisbane houses has been underpinned by increasing consumer sentiment, historically low interest rates and internal migration considering the relative affordability of houses in Queensland compared to Sydney and Melbourne.

Similarly, popular areas of the Gold Coast and Sunshine Coast have enjoyed strong demand considering the increased flexibility of being able to work from home and commuting to the big smoke less frequently.

At the same time, property investor activity has been strong, particularly for houses, not only coming from locals but from interstate investors who see strong upside in Brisbane property prices as well as favourable rental returns.

However, there is not one Queensland property market, nor one south-east Queensland property market, and different locations are performing differently and are likely to continue to do so.

Houses remain a firm favourite of prospective home hunters, with demand rising post-lockdown and it remains significantly elevated compared to last year.

However, apartment demand has been sliding and, in general, apartments in Queensland are a higher risk investment than houses, particularly due to a high supply of apartments that are unsuitable for families or owner-occupiers.

In summary…

Brisbane is likely to be one of the best performing property markets over the next few years, but while some locations in Brisbane have strong growth potential, and the right properties in these locations will make great long-term investments, certain submarkets should be avoided like the plague.


Now read: Brisbane property markets forecast for string growth


 

Brisbane

 

 

Qld Economy

Our Metropole Brisbane team has noticed a significant increase in local consumer confidence with many more homebuyers and investors showing interest in a property.

At the same time we are getting more enquiries from interstate investors there we have for many, many years.

If you’d like to know a bit more about how to find investment grade properties in Brisbane please give the Metropole Brisbane team a call on 1300 METROPOLE or click here and leave your details.

Canberra House Price Forecasts

Canberra’s property market has been a “quiet achiever” with dwelling values reachING a new peak after growing 14.2% over the last year.

Considering a large percentage of Canberra population is employed by the government or industries supporting the public sector, Canberra’s property market has not really felt the effects of the upcoming recession like our other capital cities did.

Moving forward, this resilient property market will continue to enjoy solid but slower property price growth, and apartments will continue to underperform the housing market in Canberra.

The apartment market in the ACT suffering from an oversupply of new dwellings relative to its population growth.

At the same time, there is an overall preference for houses as opposed to apartment living in Canberra, and even though units in the ACT have performed well, they pose a higher risk than houses in Canberra.

Act

Perth House Price Forecast

Perth’s long-awaited recovery was interrupted by COVID-19 with values falling in the middle of last year but now Perth’s housing market is back on a recovery trajectory, with home values posting a 4.2% increase in the last quarter.

Perth continues to be the most affordable capital city for houses in the country and this along with a record-low mortgage rate, improving economic conditions and government incentives are some of the factors supporting renewed price growth.

Perth house prices could increase in the range of 6 to 10% over the next year, particularly for mid to high-end properties.

Lower priced properties are not likely to perform strongly in there is little demand for housing in regional Western Australia.

Rental markets are amongst the tightest of any capital city, with the lift in rents through the COVID period to the date the highest amongst the capital cities.

But this does not mean that investors should jump into the Perth property market – there are better opportunities in other parts of Australia.

The problem is the Western Australian economy is too dependent on one industry – the mining industry, and much of this dependant on China.

Without structural changes to the W.A. economy, it is unlikely to be able to deliver the significant number of higher-paying jobs and the substantial increase in population growth required to keep driving strong housing price growth in the medium to long term.

Perth

Hobart House Price Forecast

Hobart was the darling of speculative property investors and the best performing property market in 2017- 8, and while dwelling values reached a record high in February 2020, its boom interrupted by Covid-19.

Hobart property values are moving up again with values up to new record levels up 13.8% over the past year.

Hobart

Adelaide House Price Forecast

Adelaide’s housing market has moved from strength to strength over recent month, with home values reaching new record highs – up 10.3% over the next year.

Relatively low housing prices and the stimulus of low-interest rates are likely to be the main factors behind the growth in housing values.

With housing affordability in Adelaide substantially better than the other states, combined with the fact that the current low mortgage rates make it cheaper to buy them to rent, it is likely strong demand for houses will continue to push up Adelaide property values in 2021

It is likely that overall Adelaide house prices could increase by 5 to 8% in the next 12 months.

On the other hand, despite good affordability, the demand for apartments in Adelaide is generally low and they are not considered popular dwelling option amongst families

Adelaide

Now is the time to take advantage of the opportunities the current property markets are offering.

Metropole Team

Sure the markets are moving on, but not all properties are going to increase in value. Now, more than ever, correct property selection will be critical.

You can trust the team at Metropole to provide you with direction, guidance, and results.

Whether you’re a beginner or an experienced investor, at times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s exactly what you get from the multi-award-winning team at Metropole.

We help our clients grow, protect and pass on their wealth through a range of services including:

  1. Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family.  Planning is bringing the future into the present so you can do something about it now! Click here to learn more
  2. Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $4Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney, and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment-grade property.  Click here to learn how we can help you.
  3. Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
  4. Property Management – Our stress-free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years, and our properties lease 10 days faster than the market average.

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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit Metropole.com.au


'Latest property price forecasts revealed. What’s ahead in our housing markets in the next year or two?' have 85 comments

    Avatar

    February 5, 2021 Philip Tomazin

    Hi Michael, I am looking to be a first time investor in my Perth market. Around $500,000.
    Can you suggest any suburbs that should attract strong capital growth in the future?
    Thank you

    Reply

      Michael Yardney

      February 5, 2021 Michael Yardney

      While Perth is likely to have a strong property price growth in the short term, your budget will be reasonably restrictive, and before I would even recommend the suburb, I first must understand what your intentions are, what your timeframe is, what your cash flow situation is and your risk profile etc, etc then I would help you put a strategic plan together and only after you have a plan to become the person you want to become would we start looking at properties. Property investment is a process, not an event, and the reason most investors fail, and 50% are first time investors sell up in the first five years is because they don’t have a plan. You can read more about strategic property plans here

      Reply

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    January 18, 2021 Kat

    Hi Michael, really interesting article with lots of resources to back it up. I have recently committed to a property based in Cobbity that seems supported by the general guidance in your article but contrary to your thoughts to another poster specific to the area prospects. Can you please DM me so I can provide my specific goals and circumstances, for your thoughts? While no one has a crystal ball, it doesn’t hurt to get views on both sides of the argument coin. Thanks.

    Reply

      Michael Yardney

      January 18, 2021 Michael Yardney

      Kat – sorry Cobbity is NOT in any way supported by the commentary in this article – it is definitely NOT on my radar.
      But if you’ve already committed, you don’t really want my thoughts do you?
      I genuinely wish you all the best with your investment

      Reply

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    January 3, 2021 Kim

    Hi Michael,
    I was thinking about buying in Newcastles East End development as an investment property. Would love to know your thoughts.

    Reply

      Michael Yardney

      January 4, 2021 Michael Yardney

      May I please be blunt … many invetsors start by finding a property they like and then work backwards looking for data confirming their (often emotional) decision.

      That’s the wrong way round and that’s why I can’t answer your question. We need to start with your goals, your plans, your strategy, your finance capacity, your time frame and your risk profile amongst many other factors and only then can we start looking at properties that would help you achive your goals

      Reply

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    December 4, 2020 Alison Duffy

    What a perfect analysis Michael. I wish more people would do this to be honest. I fully agree with most of the statements made and I do not really understand why people are so negative in general about the state of the Australian real estate market. It seems the media keeps talking about how demand will go down, over and over again, when in truth, all of us working in real estate know that these things vary. There are always regions that are more popular than others and this can change so fast. Renting though will always be popular. I should say, more and more popular.

    Reply

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    December 3, 2020 Adam

    Hi Michael, I would really like your opinion on investing in the outer Sydney western suburbs, Cobbity for example. I am considering building a new home with higher end finishes/design in a new development with a reputable builder. Will these areas see home prices surge beyond the $1million mark in the next 5-10 years? All reports suggest that the area will see population growth of 1million plus by 2030 and the airport completion by 2026. Is it a good opportunity as a first time home buyer to get into a house and then sell out of the suburbs 10 years down the track once the area matures? Thanks, really appreciate the article.

    Reply

      Michael Yardney

      December 4, 2020 Michael Yardney

      Adam – the answer is very simple – while there will be substantial population growth, those locations will continue to underperform in the long term.
      your budget allows you to buy in a much, much better location

      Reply

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    November 30, 2020 JAGBIR SINGH

    Hi Michael,
    Thanks or replying.
    My strategy is +gearing with steady growth, budget $600k

    Reply

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    November 30, 2020 JAGBIR SINGH

    Thanks Michael,
    First timer, thanks for sharing your knowledge.
    I would like to invest in Canberra in quality apartments by thinking its limited land in Canberra and steady population growth. Whats your thought on this.
    Regards
    Jagbir

    Reply

      Michael Yardney

      November 30, 2020 Michael Yardney

      Before I answer that I must know a bot more about you – what’s your investment strategy and what’s your budget?

      Reply

    Avatar

    November 23, 2020 nick

    best way to get wealthy is to have no children

    Reply

      Michael Yardney

      November 23, 2020 Michael Yardney

      Nick, in my blended family I have six children and 10 grandchildren and I am very wealthy. I’m not talking about my property or material wealth but the fact that I have such a lovely family.

      Reply

    Avatar

    November 20, 2020 Rashmikant Thakrar

    It is difficult to forecast anything. After lock down effect to economy, job market and housing market always going to look really good. Simple fact those business now open up and people who were waiting for those items and going out for coffee will start in numbers and novelty dies down. Same thing people were in the midst of moving or buying were on hold so all back dated transactions in the short term will look good. I am not saying property will crash and we will still be in a recession. The short term upward trend will have a dip after people start to get to normal.

    Reply

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    November 15, 2020 TSJ

    Hi Michael,
    As a regular reader of your articles who happens to now be based in Tasmania. I find that many of your observations or predictions about the southernmost state are biased heavily – and often almost entirely incorrect. I see that you have explained this bias in previous responses to people’s complaints like mine, however, you have done nothing to correct this from happening repeatedly.
    The fact is, that despite predictions to the contrary, Tasmanian property markets are continuing to do extremely well, with new record prices being regularly achieved, even despite – and perhaps even because of – border closures and COVID-19. The rising prices here are no longer as appealing as the initial reason for the housing boom, yet people continue to drive those prices higher. The reason for its appeal has little to do with the availability (or not) of big city jobs, or other economic indicators. Like other mainland regional locations that are desirable lifestyle locations, Tasmania is simply a wonderful place to live. I have lived in many places including Canberra, Brisbane and London UK, in good suburbs and quality housing and Tasmania is by far the most enjoyable place I have lived. (I have lived in both Launceston and Hobart). Even at the lower end of the housing price spectrum, property owners can expect to experience some unexpected lifestyle benefits, like a stunning view or private outlook (if you don’t have one where you live in Tasmania, you are in the minority of home owners). It is a very scenic place to live.
    With WFH opportunities increasing and a proactive business focussed state government down here, job opportunities will only grow over time, as they have been steadily doing for many years in recent times. But even if they didn’t, people would still choose to come here in droves, because the people who don’t need standard employment options or who are self-employed or can work from anywhere, or are tradespeople (in very high demand down here) or medical or education professionals (also both in demand, will be unaffected by local jobs or a lack thereof and the lifestyle benefits here are great.
    Who wouldn’t trade their small 2 bedroom renovator in inner city Melbourne or Sydney
    And one of the truisms of property markets is perpetual here – high demand with scarce supply. Whilst that simple equation exists, and with the affordability and relative value compared to the mainland, and the desirable lifestyle and now WFH on offer and low interest rates and COVID-19 lockdown fatigue, the conditions are ripe for the upward trend in pricing to continue for some time to come. Plus TAS economy has twice been voted the top performing one in the country and continues to defy the odds of what are usually reliable predictors.

    Reply

      Michael Yardney

      November 15, 2020 Michael Yardney

      You are right the Tasmania and in particular the Hobart property market has performed extremely well over the last five years.
      I prefer to invest in the large capital cities where the economies are larger and therefore less volatile and where there are multiple growth drivers. The size of the Hobart market is such the small influences in either direction can significantly influence property values

      Reply

    Avatar

    October 7, 2020 Flo

    Reading your thoughts made me quite stressed and upset as I bought into Green Sq about 4 years ago now. 100 meters to a station, 2 stops to the airport and one to Central and a solid build of four levels high, I was happy with my purchase. I’m not really wanting to take on a mortgage right now as an owner occupier ( I own it outright) and prefer to invest elsewhere or dump extra funds into Super. But fear has gripped me, that I’ve made a horrid mistake. I understand that over the next few years the prices will fall somewhat but I’m hoping that will level out eventually with borders reopening. If it’s wiser to sell now and buy somewhere in outer Sydney, in the next year, than I might consider it but it feels like a knee jerk reaction from the doom and gloom of what I’ve read here. But I’m open to your thoughts.

    Reply

      Michael Yardney

      October 7, 2020 Michael Yardney

      Flo – sorry I did not intend to scare you. And I can’t give you personal financial advice over the Internet. However if this is your home and you have no debt, it really doesn’t matter what’s happening to the market around you does it?

      Reply

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    September 12, 2020 SAM

    Hello Michael,
    Would you please give me your idea about ” MOE – VIC 3825″ ?
    Why people don’t like to invest there ?
    Thank you in advance.

    Reply

      Michael Yardney

      September 12, 2020 Michael Yardney

      Sam with a population of less than 9,000 people and no real reasons for a significant population growth and no real other growth drivers I can understand why investors don’t have Moe on their radar

      Reply

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    September 9, 2020 Jeffrey Osborne

    Hi Michael. Thanks so much for all the valuable information that you share. I own a small property business myself in Western Sydney and we aspire to be like your company in the efforts and the lengths you go to in order to help people feel more confident about their future. Particularly in these difficult times. Thank you.

    Reply

    Avatar

    August 26, 2020 nat

    Hi Michael
    Just after some advice. I just bought some land on the mid north coast NSW. I want to start build this yr for a duplex but worried if property prices. Will this include cost of building, like should I wait to lock in to build contract till next year incase price to build drops?
    Many thanks nat

    Reply

      Michael Yardney

      August 26, 2020 Michael Yardney

      Nat, there are many factors to take into account including your holding costs, what your intention is – buy and hold or on sell, supply and demand in the area, builders margins etc.
      I really can’t give you advice like this over the Internet – it would be very wrong to do so

      Reply

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    August 19, 2020 Property002

    Dear sir,
    Thank you for sharing your experience with us.

    Reply

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    August 19, 2020 Drew Riley

    The Gold Coast market seems to be booming at the moment due to low stock and out of state buyers looking for a change in lifestyle. Many homes are being bought by out of state residents without them even seeing the property. Do you expect property prices to continue to rise as more people begin working from home and looking for more affordable, lifestyle residences?
    Thanks Michael.

    Reply

      Michael Yardney

      August 19, 2020 Michael Yardney

      Drew. I’ve always enjoyed my annual vacation to the Gold Coast and have seen it mature over the last 50 years.
      And yes, property values will continue to increase, but unfortunately it is a much more volatile market than Brisbane, so I’ve always avoided investing there.
      And I’m happy I have – it’s still not on my radar

      Reply

        Avatar

        August 20, 2020 Drew Riley

        Thanks Michael! I think it’s epic you take the time to reply to everyone. I just bought a house on the canals in palm beach, gold coast which also close to the beach and the proposed light rail that will run from Surfers Paradise to the airport. Do you think buying properties that are limited (low residential density and there aren’t many properties on the canal) is an effective strategy when investing?
        Also I read that experts are forecasting the Gold Coast’s population is expected to grow to 1 million by 2021. How much of an effect does population growth have on property prices?
        Thank you so much Michael! Any wisdom you could pass on would be much appreciated.

        Reply

          Michael Yardney

          August 21, 2020 Michael Yardney

          Drew -I don’t = answer specific questions about specific properties.
          As you can imagine a lot of people by their properties first, then ask me for advice confirming that they’ve made a good decision.
          However it sounds like the type of property you bought on the Gold Coast is likely to be one that outperforms the area in general.
          Population growth is important, but more important is supply and demand. Population growth in areas with a substantial supply of vacant land or the ability to create new land does not create necessarily create capital growth. Similarly lots of new development doesn’t create capital growth – supply is the enemy of capital growth

          Reply

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            August 21, 2020 Drew Riley

            Thanks mate! You’re an absolute legend. I’m a big fan of your work and appreciate the time you’ve given to respond. All the best to you and your family!

    Avatar

    May 21, 2020 Dee

    Would love to know your opinion on regional NSW , port macquarie area ?

    Reply

      Michael Yardney

      May 21, 2020 Michael Yardney

      Are you looking to live there or as an investment location.

      If it is for investment, I would avoid regional Australia for many reasons as discussed in many blogs on this site. Why fight the big trends of multiple pillars of economic growth and population growth – I would stick to the capital cities

      Reply

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        May 25, 2020 James

        Hi Michael,

        Thank you for this very detailed article and for responding to the commenter above. I was looking into investing in the central coast but starting to think that might not be wise. I currently live in Sydney’s Northern beaches (its own micro-climate of a property market) and now thinking a unit in Newport or Dee Why would be the way to go. Can I get your 2 cents on that? Will also reach out to your company….

        Reply

          Michael Yardney

          May 25, 2020 Michael Yardney

          Interesting James – neither of these suburbs are on my radar.

          I can’t give you advice over the internet of course, I don’t know your circumstances, your budget, your timeframes or your risk profile. However please do reach out to my team at Metropole and would be happy to give you strategic advice

          Reply

    Avatar

    January 15, 2020 Nathan Brown

    Dear Michael, Most property reports tend to miss outer-west Sydney. How are things looking for Penrith? You say off-plan is still falling? We bought off-plan (at least in the more ‘prestige’ area the Penrith)price fixed in late 2015 (but settled in late 2018) so at least hope the price went up before dropping. Perhaps it’s now worth what we paid for it? Could we expect any growth in say 5 years?

    Reply

      Michael Yardney

      January 15, 2020 Michael Yardney

      Nathan – sorry to hear you bought an apartment in Penrith – it’s an area that is likely to underperform over the next few years as it’s an area where the locals will have minimal wages growth.
      As for an increase in value in your apartment, it really depends in which block you bought and how much you (over)paid.
      Sorry – I don’t mean to be negative, I’m very positive for many parts of Sydney but not those outer suburbs

      Reply

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        January 16, 2020 Nathan Brown

        Thanks Michael. To be precise it’s in the Thornton area, right next to the train station. Not sure if it qualifies as the same kind of ‘high rise’ as Sydneysiders are worried about. Paid about $600k in 2015, come settlement date in 2018 they were re-selling for $650k, so I assume the price falls are to be taken from this peak? Tricky to work out but hope it may be holding its 2015 value.

        Is the Western Sydney airport likely to have a positive effect on the outer suburbs? Happy to keep it longer term and would even move into it upon return from UK. Your reputation spreads far and wide! Thanks again, Nathan.

        Reply

          Michael Yardney

          January 16, 2020 Michael Yardney

          Nathan – I’m pleased that your property held its value at settlement. Having said that values out there have fallen a little since.

          Please read this article for some of my thoughts

          I’m not trying to be alarmist, but I know many other industry professionals feel the same.

          Reply

            Avatar

            January 16, 2020 by Nathan

            Thank you, very interesting article. The units actually had INCREASED by up to 10% at settlement which gives some hope. Rental yield is currently 4.5% p.a.

            Finally, is the Western Sydney Airport positive news for property values in the greater west/Penrith when it opens?

            Michael Yardney

            January 16, 2020 Michael Yardney

            Nathan. There are too many unknowns regarding the proposed airport to make any suggestions

    Avatar

    January 9, 2020 Jon

    Thank you Michael, and in terms of the established apartment markets in Sydney, is there a certain number of levels you would not go near? For example is a unit complex with 20 units something that’s acceptable from an investment point of view?

    Reply

      Michael Yardney

      January 9, 2020 Michael Yardney

      Jon, remember most areas in Sydney are not what I’d call “investment grade” locations for example our research has identified less than 30 suburbs that we are prepared to invest in, then within those suburbs less than 5% of properties are investment grade. I don’t want to mislead you with hard and fast rules – are you currently looking to invest? What is your budget?

      Reply

        Avatar

        January 10, 2020 Jon

        Hi Michael it would be for a first home, preferably somewhere between the $700-$800k range.

        Reply

          Michael Yardney

          January 10, 2020 Michael Yardney

          Your first home won’t be your forever home, but if you get it right it will be your steeping stone to building a portfolio of properties.
          Get it wrong and it will be a mill stone around your neck.
          Why not let my team at Metropole help you?

          Reply

    Avatar

    January 9, 2020 Jon

    Hi Michael,

    Thank you for your very detailed article. I specifically wanted to ask in regards to the following comment in your article:

    “Sydney is currently offering investors an opportunity to buy established apartments in the eastern suburbs, lower north shore and inner west at a significant discount to what they would have paid a few years ago and the prospect of the market moving forward over the next few years.”

    Is this alluding to steering away from high rise apartments in general? I was wondering in your reference to established apartments whether this meant the smaller apartment complexes in general.

    Thank you.

    Reply

      Michael Yardney

      January 9, 2020 Michael Yardney

      You’re right it both cases Jon
      Steer away for the new and off the plan complexes – many will become the slums of the future as they are tainted with all the structural issues. Others are steering clear, banks are scared, insurers are scared – many naive investors will lose oney in these over the next decade

      Reply

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    January 6, 2020 Peter Evering

    Dear Michael nice article!

    According to Zillow the U.S. housing market – despite a record bull market over the past decade – could enter a recession in 2020. What do you think?

    Reply

      Michael Yardney

      January 7, 2020 Michael Yardney

      Sorry I don’t follow the US property market. It’s hard enough to keep up with theAustralian market

      Reply

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    November 20, 2019 AJ

    haha.. its really from a future. the date of article is 4th December 2019. really ?

    Reply

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    August 20, 2019 Bernadette

    Predicting the property market is just that! a Predication. I attended a real estate seminar 1 year before GFC and some guy asked the question, What happens if the banks fail! The experts on the panel “laughed” … the rest of the story has been told!

    Reply

      Michael Yardney

      August 20, 2019 Michael Yardney

      Bernadette – you’re correct – the main use of property forecasters is to make meteorologists look good 🙂
      But it’s still importnnat to understand the fundamentals at play and how things could pan out

      Reply

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    July 15, 2019 David Spar

    Haha. Predict all you want. Stats and all. My advice…just make sure your cashflow is in check, don’t rely on one income, have buffers in place and weather the storm. Everyone is accountable for their own actions and the circumstances you are in are a result of your choices. Whether that be because you planned ahead or you didn’t, and now realise that you can’t make the right moves when opportunity arises. Those who have structured their portfolios and lives correctly will see good and bad times as a win-win. And, if you want to continue furthering your education and invest in yourself… Get onto Grant Cardone. Study those who are the most successful in their field. Good luck to all, otherwise.

    Reply

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    May 18, 2019 Nathan

    Hey can you please do my economics assignment

    Reply

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    January 31, 2019 Financial Gladiator

    Interesting read and I’m glad I came across your very optimistic post and more importantly blog overall. Allow me to share a slightly more pessimistic view. I personally believe that it is still cheaper to rent than own in Australia in case of apartments if you calculated the holistic cost of owning and inflation. In my non expert view prices have to drop another 20ish % over the coming two years in Sydney and Melbourne. Why?
    1) China (Australia’s biggest trading partner) and the US (third biggest trading partner) will likely go into recession within the next 12 months.
    2) Australian government and the RBA changed legislation and interest rates respectively to allow large flows of foreign capital (mostly Chinese) to artificially inflate Australian prices unsustainably.
    3) Housing ownership fell drastically from about 70% to below 65% since the Global Financial Crisis (GFC) in 2007/2008
    4) Australia made it to a top ranking globally amongst all countries regarding the “household debt by GDP” (almost 123%)
    5) Property prices increased over 100% in Sydney and Melbourne since the GFC, far outpacing the growth of average wages.
    6) Chinese government has severely restricted Chinese capital to leave the country in 2017. And Chinese investors (together with speculative investors) were largely responsible for the inflation of the Australian housing market.
    7) While 2018 showed a large amount of Interest Only (IO) expiring, 2019 will have the highest number mortgages that will need to be renewed. The recent change of heart of APRA to loosing restrictions on banks regarding IO lending will only slow down the correction.
    8) Investor and PPOR homebuyer confidence is at an all time low and awareness of the perils of overleveraging and interest only rates is at an all time high.
    9) With net rental yields at an all time low (3%) in capital cities thanks to high levels of taxations (some of the highest in the World) falling average rents will force some investors to sell part of all of their investment properties. If rental yields equal inflation of 2.7% you made no money at all while bearing all the risk and work associated with owning an investment property.
    10) Affordability is a key concern for me: If the median income in say Melbourne is 80,610$ per annum, taxes and super takes shaves off some 23,409$ from the get go, average living expenses for a single person per year are 21,840$, and average rent expenses are in the ballpark of 18,040$ it would still take just shy of 10 years to save up for a deposit for an average house of 833,321$ (2018 Dec prices). All the meanwhile the person cannot fall sick, can’t take significant time off, can’t have children, have to live a pretty modest life and save nothing else but for the deposit. If the person has a partner they could probably make it in 3-4 years but still you cannot afford kids then or say a wedding.

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    January 12, 2019 BRENDON GILL

    It is strange how everybody in this country blames investors and builders for the high cost of houses, yet Australia’s cost of construction is 23% less than America and cheaper than most European cities however it has some of the most expensive lands in comparison to America and Europe, this is because state government’s artificially inflated land prices through blocking supply through planning delays and by adding taxes both state and federal, why do we not recognize that most houses are 40% higher because of these reasons, it is even stranger that governments point the finger at investors developers and builders for the reason for the high cost of housing when the problem is clearly policy set down by government that is the problem, GST, stamp duty, and many hidden charges that are really another form of tax, affordability for all Australians can happen if the government take a hard look at what they have created and stop burying there head in the sand, both Liberal and Labour state and Federal are complicit.

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    December 29, 2018 Lisa

    I am a migrant myself, I really appreciate there are so many opportunities in this country with wonderful people. Most people are trying to do the right things. I have worked and studied very hard in Australia and made a good life here like many migrants. The door to go back our own country is open every day, you choose to come and stay in Australia, so please be thankful for this country welcome you. Life is what you made of yourself. Please don’t blame this country. Please don’t expect free lunch and free housing as all our taxpayer, your fellow workers, has to work hard for your expectation. Let us all work hard as a team make this country greater for ourselves and our next generations.

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    December 27, 2018 Wayne Ehrlich

    I’ll take your predicted 13% increase for Brisbane, thanks. I have studied the stats and I think it will happen here IF the extra state immigration continues AND that all the approved inner city units are not ALL built.
    We have sat up here in Queensland with low growth rates for many years (read affordable) while Sydney and Melbourne have boomed and now there so may negative comments about the continuing “correction” down there. They must all be Harry Dent followers! I managed to attend Harry Dent on his recent tour BUT don’t accept his predictions verbatim. He has some good models and supporting data BUT it has to be appropriately interpenetrated. I could be a cynic and say he just comes out here when he know we are in a downtrend so he can sell his books and newsletters.
    I think Michale’s use of selected data providers is a much more balanced and rational.

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      Michael Yardney

      December 29, 2018 Michael Yardney

      Thanks Wayne – let’s look back ina few years and see what has transpired

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    December 4, 2018 Peter Horsfield

    The median value in each city at the end of November 2018 was:

    • Sydney $821,438 not $1.12 million

    • Melbourne $656,163 not $870,000

    • Brisbane $493,041 not $550,000

    • Adelaide $433,464 not $510,000

    • Perth $448,336 not $520,000

    • Hobart $451,039 not $485,000

    • Darwin $426,141 not $505,000

    • Canberra $596,141 not $700,000

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      Michael Yardney

      December 4, 2018 Michael Yardney

      Peter – if your pint is that property values have fallen since this article was first written you are correct. Does this change the fact that prices will recover and reach new highs? Not at all

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    December 3, 2018 Julie

    Thank you for your article and comments Michael.We do need a 360 degree approach to make our predictions and columns like yours are of value, whether people agree or not. I feel Media has a lot to answer for, we do need to be honest here and recognise that its no coincidence that what Media creates is usually the outcome. We know this each time there is an election (or the desire to remove a Prime-minister to sure up your own interests). Since 2010 it has been said by many economist that the GFC did not need to happen in Australia, it was a reaction from what people read in the medias “predictions”. People in Australia panicked and stopped spending, which in turn,,, resulted in our economy slowing. There are experts in the USA saying for the past few years, that the big end of town players are itching (pushing) for another crash because it’s where they make huge investments by snapping up bargains, feeding off others losses. I’m certainly no expert, but I have to question where the truth lies. What has really changed since Dec 2017 to swing the housing market into a negative direction when employment numbers are up, interest rates are low, population growth is strong and people are still spending on unnecessary items? Tightening up leading had to be done. I just hope and pray people have the sense to not listen to media this time, (Media moguls with good mates at the top end of town wanting to shift dollars to create bigger tax right offs) and people keep spending as normal. When the purses of the every day consumers close the economy stops and its a slippery slope from there. No one has a crystal ball, last time a very small number of experts got their predictions right .

    Reply

      Michael Yardney

      December 3, 2018 Michael Yardney

      You’re right Julie – the crisis of investor confidence is being led by the media

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    November 19, 2018 Tony

    This article is insane. I have not seen anybody forecasting the growth of house market in the next five year. Most people believe the house price will dip another 30% in the next five year.

    Reply

      Michael Yardney

      November 20, 2018 Michael Yardney

      You are right Tony – Australia has 25 million property experts – everyone has an opinion don’t they?
      And then there are some institutions with large research departments and the RBA. I know who’s opinions I’d rather trust

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    November 9, 2018 Jim

    On one hand you blame the media and then use the very information reported through the media to support your argument, ie the QBE national house forecast. You cherry pick the data that supports your view but are missing real numbers and data that has already happened.
    Fact: Sydney has dropped by 8.9% in the past 12 months
    Fact: It’s the fastest decline in prices in 3 decades
    Fact: It’s the second largest price correction since the 1990 recession
    Fact: Prices and demand are still softening in Sydney
    Fact: The auction clearance rate is the weakest since the GFC

    There is alignment with Macquarie Bank, Westpac, AMP and ANZ that prices in Sydney will decline by 20% from peak to trough when this correction is all said and done. Also, Herron Todd White’s property clock points to a similar outcome and if you’re on the ground in Sydney property markets, you can see in real time the pull back from buyers.

    Tighter lending practices are not abating and a federal election in the first half of next year will further suffocate activity and magnify the correction. Yes, many can ride the wave but the thought of a 3% increase by 2021 is unrealistic.

    Sydney will be down at least 15% by Feb and this December will be a bloodbath as buyers dessert the market and leave a huge volume of sellers clambering to find a buyer pre-Christmas and in many cases will significantly drop prices to avoid having a listing move into 2019.

    You can be the optimist but please don’t be the fool and ignore real facts about the Sydney market as it discredits all your information and makes it hard to believe anything you report. I’d think most would be happy if the market just stabilised by 2020.

    Reply

      Michael Yardney

      November 9, 2018 Michael Yardney

      Jim
      You’re correct – some are predicting a blood bath – but they have been doing so for years. And I agree some segments of the Sydney property market will fall more than 20% – especially all those new apartments many of which were sold to unsuspecting investors. I’ve read the sources you’ve quoted and I’ve also read the comments from DR Phil Lowe – our RBA Governor – I don’t think he’s a fool – I’ll listen to him

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    September 25, 2018 steve weingarth

    At least you are realistic about a mild softening of prices in the major capitals and a long overdue rise in Brisbane,unlike the doom and gloom people interviewed on 60 Minutes recently.Fear generating predictions about price falls goes on every few years and some so-called news and current events programs are irresponsible in making these out to be accurate forecasts from experts.

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      October 5, 2018 VICKI

      Agree with you on this – there is a lot of doom and gloom in the media at the moment.
      Also, I like Michaels quote: Fact is: meteorologist tend to predict the weather better than property commentators predict future property capital growth. This is very true.

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    July 30, 2018 Rastus

    It’s a sorry reflection of the times we live in when we celebrate the rising cost of providing shelter for your family. The social cost of both parents having to work in order to afford a home – kids in daycare, less disposable income to put to into their development… this is the situation for so many families now. This inconvenient truth is happily ignored by those who profit in the current market, and while money it to be made it is unlikely to change.

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      Michael Yardney

      July 30, 2018 Michael Yardney

      Rastus I understand where you are coming from. But this is one of the prices we need to pay to be able to live in the best country in the world at the best time in history. Rather than lamenting it, we should be grateful the opportunities Australia offers

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        November 28, 2018 Ahmed

        With due respect – basing your economy on deriving brain-drain and short term cash from third world country migrants, on one hand, and making it overly difficult for the locals to be able to afford dwelling…I see Australia going completely without wisdom and driven by greed. There is nothing about this to be referred in terms of being a ‘great country’.

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    June 29, 2018 harris

    Thanks – this is intersting. It will be interesting to look back in a few years and see it they’re right

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    June 29, 2018 CoreLogic

    always hit and miss with this guy

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