2018 in Australian Property – my top five predictions
By Rich Harvey, Managing Director propertybuyer
There’s a feast of opinions available on Australia’s property markets and how they might unfold in 2018.
It’s become the norm for experts, analysts, advisors and amateurs to stare into the horizon with a firm jaw and cool gaze, draw together their threads of experience (or lack of) and produce a judgement on navigating the waters of Aussie bricks and mortar. Some like analysed numbers. Others prefer qualitative experience and some, sadly, are underqualified and over prepared to dish out advice.
At our organisation, we’re uniquely placed to marry up data-house observations with our day-to-day on the ground home buying experience in order to give you a well-balanced opinion of what to expect from our nation’s real estate this annum.
To keep things simple, here are my top five predictions for Australian property in 2018.
RBA to hold (reasonably) firm
There’s no doubt the glancing blow caused by interest rate rises have the potential to become a more profound knockout, particularly for overextended investors this year, but rocketing percentage increases are not on the cards.
This year, the RBA will hold steady on rates, except for a possible 0.25 per cent rise in the second half of 2018 or early 2019.
My only caveat is to watch our country’s economic performance. If fiscal results pick up pace sooner rather than later, the RBA will respond.
But before you get too comfortable with my prediction of distant increases, remember – financial institutions dance to the beat of their own drum. Borrowers can expect to see the big four choose to raise rates independent of our central bank, and this will trickle down to smaller lenders too.
The outcome is that already leveraged investor who’ve taken more than a few body blows via APRA restrictions, will feel another hit to the solar plexus.
Whenever the rate rise does arrive, I believe overheated markets will take a moment to check themselves. That, in my opinion, is a good thing because homebuyers could use a little help.
Sydney will not burst
Do not expect a price apocalypse to rain down upon us in the harbour city this year.
Despite evidence of an overall market slowdown, any observer confidently foreseeing a cataclysmic depression in Sydney property prices is going to be very wrong.
You can certainly expect to see more doomsday predictions around the traps. They make great stories and stir up plenty of comment, but the reality is Sydney is a resilient market – it’s still the economic and finance powerhouse hub of Australia. Along with being the country’s employment centre, Sydney’s status as a world class capital with an abundance of natural appeal will continue to attract buyers from across the globe seeking quality homes.
The key to Sydney will be to buy smart. If you can be well informed, highly researched and are able to draw on your networks to stay ahead of the game, there’s money to be made in the harbour city this year.
2018 – the year of the homebuyer
A number of high profile Aussie capitals are tussling with an oversupply of new investor-pitched units (and yes Brisbane – I’m looking at you). Couple this with tightening APRA restrictions, more choice for tenants and those potential longer-term rate rises, and you can see that in some key locations, investor-led housing stock will have a hard time in 2018.
Another potential hit to the investor market is new rules around tax deprecation which will make it just that little bit less attractive to own a second-hand investment property.
But nature abhors a vacuum, so where the past few years may have seemed like a property investor’s nirvana, expect homebuyers to start filling the void and become even more dominant in our markets.
As such, thoughtfully designed, well positioned homes that appeal to owners will continue to do very well along the eastern seaboard.
More double ups in living spaces
Our social fabric continues to evolve.
Multi-generational households have already been on the rise. Children are looking to stay at home longer to save up for a house deposit (or their next overseas jaunt) while our aging population seeks assistance from their adult offspring.
There is, however, a new phenomenon in multi-living on the horizon I’ve noted too. Some buyers, particularly in Sydney, are looking to offset the cost of housing by subletting spare space in their homes. I know of a few instances where purchasers have factored an onsite tenant in their loan serviceability calculations – hence they’re able to step up a notch in their purchase price ceiling.
There’s another factor worth considering here too. Elder Aussies can ‘downsize’ through subletting space in their abode. By taking on a border, they release some of the pent-up income potential of their oversized family home while continuing to live in a community they’ve come to know and love.
The end result is you can expect to see homes with extra, separable living areas becoming even more attractive in 2018.
Say hello to the high-rise retirees
Thoughtful town planning is resulting in a new breed of high-rise retiree.
Community and commercial hubs created well away from our CBDs include comprehensive facilities such as medical, retail and transport. Councils are then promoting higher density redevelopment around these new community centres, allowing developers to create accommodation that’s secure and low maintenance.
Empty nesters wanting to stay close to all the necessary services find that by buying a new unit, they can walk downstairs for a tasty café breakfast, do their shopping, see their nearby medical specialists and financial advisors, and have low maintenance, high quality homes with lock-and-leave potential when they travel.
This move to high-rise will also free up stock for families wanting big back yards in the older suburbs. Centralising retiree living will help improve suburban detached house supply, moderate prices and give families more opportunity to get into established addresses.
2018 will be a year of change across our country’s diverse property markets and keeping track of opportunities and threats can be exhausting. If you are keen to dip your toe in the water of Aussie real estate this year and want to find those markets with the best potential, it’s essential you have an experienced property professional like us in your corner.