2018 will be an interesting year for the residential property market across Australia, with selling prices, clearance rates, and sales numbers all beginning to trend down marginally, according to Enzo Raimondo, CEO of view.com.au.
“The property market in Melbourne has shown signs of softening this spring, with clearance rates gradually dropping from 73 per cent in the last week of October to 68 per cent in the last week of November,” Raimondo told Your Investment Property. “This followed an average clearance rate of 74 per cent in October.
“The number of sales and auctions in November was consistently high, however, all above 1,500 each week in the month (apart from Cup weekend). The slight fall in clearance rates indicates a reduction in demand within the market, which has come as a result of a number of influencing factors.
“The macro-prudential efforts of the Australian Prudential Regulation Authority (APRA) this year have played a strong role in limiting the number of interest-only loans to buyers, while high energy costs and slow wage growth in Australia are also influencing people’s decisions to enter into new mortgages.”
First-home buyers are finding affordable entry points
Raimondo forecasts a reprieve for first-home buyers, as prices start to stabilise in 2018.
“We should see a break in what has been a yearly double-digit rise in median house prices in both Sydney and Melbourne over the past five years. This will allow those who have been previously priced out of these markets to find affordable entry points.”
APRA’s latest round of macro-prudential measures on risky lending practices has begun to impact the market and will continue to do so next year.
“A tighter focus on lenders has driven up the cost of new interest-only loans, creating room for first-home buyers to move in where investors have taken a step back. Since the GFC, the proportion of first-home buyers entering the market gradually fell to well below 15 per cent, but APRA’s efforts have had a clear impact on the market as this percentage has climbed back up over the year to 17.4 per cent in November.”
Developments in Sydney and Melbourne
An oversupply of units in Sydney and Melbourne will likely impact the price growth of high density dwellings within the inner rings, though this is likely to be felt more intensely in Sydney.
“Melbourne’s undersupply of houses should keep prices stable, despite a softening of the market, favouring first-home buyers and investors alike,” Raimondo said.
In Victoria, the Andrews government’s announcements this year regarding changes to the Residential Tenancies Act are a welcome acknowledgement of a diversifying market.
“For a range of reasons, an increasing segment of the population will remain renters for longer and these changes, which will hopefully come into effect in 2018, will balance the rights of owners and renters and curb the rising unaffordability of rental accommodation in Victoria.”
Strong investment opportunities in 2018
While Sydney and Melbourne will remain attractive to investors, other cities and regional areas are showing potential as investment opportunities in 2018.
“Brisbane is a first-home buyer’s dream – small but steady growth in what is still an affordable city,” Raimondo said. “Hobart has seen some of the highest growth in dwelling values in the country, while regional areas such as Wagga Wagga are experiencing a boom as investments into infrastructure, coupled with increased migration from the capital cities, drives demand.”
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