Despite the recent slowdown of the Australian property market, it is expected that demand for property will remain healthy during 2016. Increases made to variable interest rates, independent of the Reserve Bank of Australia (RBA), and changes to lending laws have led to property prices falling by as much as 1.4% across the nation. However, a recent survey of home buying trends, shows that some 40% of Australians are wanting to purchase either their first home or an investment property in 2016.
Property investment experts say that they are surprised that so many people are still looking to buy, given the recent changes. Many have said that they thought property would have played second to other financial aspirations, such as saving, budgeting or consolidating debt. But, it seems that the great Australian dream of property ownership is still ‘alive and kicking’.
One of the biggest opportunities that the current housing market represents is greater affordability. As demand for property dwindles, so too does price. This, in turn, means that higher property prices tend to fall. This combined with historically low interest rates, enables first home buyers and smaller scale investors to buy property that would have been snapped-up by larger investors and investment groups.
At present, the property market is rapidly changing. Some areas are cooling, especially those that were on the boil near the end of 2015. The greatest challenge new home buyers or investors will have in 2016 is likely to be meeting lending criteria. But, this can usually be overcome with some forethought and careful planning.
The Sydney and Melbourne property market is likely to hit the brakes over the next 12 to 18 months. In fact, the Housing Industry Association’s (HIA’s) Residential Outlook, for the new year, 2016, suggests that the current growth cycle has been ‘masked’ by Sydney and Melbourne. Outside of Sydney and Melbourne there appears to have been no property price boom. In fact, the rest of the nation’s property has been steadily increasing in price.
As of November 2015, Brisbane was the 3rd fastest growing state capital in the residential market in Australia, after Sydney, which grew at 12.8% per year, and Melbourne, which grew at 11.8%. But, with an annual growth rate of 4% per annum, you can hardly call Brisbane a boom market.
Sydney and Melbourne are Australia’s largest property markets, and after such accelerated growth in property prices over the last 12 months it seems appropriate that the Sydney and Melbourne market are experiencing price adjustments now.
These markets had mixed results in 2015, despite home loan rates falling to historic lows. After a slow beginning, Hobart is displaying signs of recovery with prices starting to improve after a period of slow buying with subdued buyers.
The Canberra market performed well during 2015, but was sluggish. Economists put this down to the consolidation of policies, which were introduced by national government. These policies had an impact on the local economy. Near the end of the year, this impact lessened as a more user-friendly budget was introduced.
Adelaide remained steady throughout 2015. The market in this capital was resilient, even though the region had the highest national unemployment rate.
The city underperformed in 2015. Weak consumer confidence and concern over local economic shortfalls had a negative impact on the Brisbane market. However, near the close of 2015, the Brisbane market showed signs of revival.
During 2015, the Perth and Darwin market’s struggled. This was expected after the mining sector experienced strong declines in the workforce with demand for ‘fly-in/ fly-out dropping significantly.
Significant change is occurring in capital city markets across Australia. Price growth has stagnated and is likely to be between 2 and 5% over the year.
According to a survey carried out in January on property investment, Australian’s feel that now is a better time to buy than mid-2015. Consumer sentiment rose by 13.9% to 113, up from 99.2, which was recorded in December.
So for those who are looking to purchase an investment property or home, now could be the right time to buy, especially if you’re willing to haggle on price. With home prices falling, some vendors are keen to sell, even at lower prices. This for an investor or owner-occupier could shave thousands off the price of a property. It also enables first-home buyers to break into the market at more affordable rates.
For those seeking to buy an investment property at the beginning of 2016, financial experts suggest looking for property that will give you a higher rental return, or a yield of over 6%.
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