What's been predicted for Sydney property in 2016?
Welcome to the new year! As you settle back into your routine, I imagine more than a few of you will be casting an eye towards the Australian property market in 2016. What's going up? What's going down? Is this the year you break into that luxury real estate market?
It's a great time to look at what industry voices think is going to happen this year, and whether or not they're really in the know. So who's saying what?
Capital growth in Sydney
When it comes to Sydney investment property, capital gains have been the word in the last couple of years. CoreLogic RP Data noted in its December rental review that even though rents grew over 2015, yields still sit at only 3.4 per cent in Sydney - hardly the positive cashflow people want out of their investment.
Meanwhile, monthly value indices from CoreLogic show that Sydney property's capital growth was 11.47 per cent over the 12 months to December 1st - much more appealing for house hunters. But will this continue over the next year?
Well, the Knight Frank Prime Cities Forecast for 2016 notes that value growth in Sydney was closer to 15 per cent across 2015, but is going to pare back to 10 per cent in the coming year. Meanwhile, the Australian Financial Review reported on January 7 that SQM Research's Louis Christopher anticipates between 4 per cent and 9 per cent, but likely closer to the low end of this spectrum.
The market here has been hot for quite a while, and some moderation was always going to happen.
I think the truth lies somewhere in the middle. Growth somewhere around 5 per cent is probably what we'll see over the course of the year, maybe as high as 8 per cent. While this isn't as fired up as it has been in the last few years, it's still very respectable returns on your investment.
The market here has been hot for quite a while, and some moderation was always going to happen. It's also important to remember that with a cooling market, the pendulum swings back towards the buyer - you'll have more power upon entering the Sydney landscape.
Capital growth in Brisbane
Despite ongoing growth in Sydney, many investors might look elsewhere for capital gains or positive cashflow property. That's where Brisbane might be an intriguing prospect for many. According to CoreLogic, value growth was 4.57 per cent across most of 2015, but it's the future where the Queensland capital should truly take flight.
BIS Shrapnel's Residential Property Prospects report pegs it as one of the only double-digit growth spots in the next three years, with 13 per cent value growth anticipated. In a December 15 Domain article, commentator Andrew Wilson highlighted Redcliffe, Everton Park, Taigum and Deception Bay as potential growth areas.
Remember the fable of the tortoise and the hare: slow and steady wins the race. It's applicable to property investment, and something to keep in mind when you look at Brisbane investment properties.
Trickledown effects for satellite cities
"Newcastle and Wollongong usually benefit when Sydney experiences strong price growth."
One of the impacts of Sydney's extreme growth is the positive effect it has on investment property in Newcastle and similar areas. As the BIS report notes, "residential property prices in Newcastle and Wollongong usually benefit when Sydney experiences strong price growth and migration into these regional centres increases".
Over the three years to 2018, Wollongong should see about 10 per cent price growth, and Newcastle 15 per cent. This won't all be concentrated in the next 12 months, but it's sure to start picking up the pace from here on in. The greater affordability in these areas is something that house hunters shouldn't overlook.
The implications for investors
Moderation and expansion seems to be the name of the game in 2016. As affordability pressures loom in Sydney, people will look for cheaper homes just outside the city, which in turn should spark growth in these areas. Investors, house hunters, speculators and the like need to start shifting their focus from short-term profits to the longer term. After all, property is a very safe investment, in that it will almost always increase in value over time.
Some areas are also rich in supply. The Commonwealth Bank's Home Buyer Index (HBI) for December 2015 indicated that many central parts of Brisbane had enough housing stock to be considered buyers' markets, indicating that you have the power when it comes to property negotiations.
Of course, you won't be alone when it comes to finding the right positive cashflow property or capital growth prospect. That's why a buyers' agent can prove indispensable as you head out into the 2016 property market. We have intimate knowledge of growth hotspots, extensive contacts to get you in on the ground floor of new developments, and the skill to negotiate a great price in a great area.
Whether you want to make the most of a moderating market or seek out the up and comers, don't hesitate to get in touch.