The Australian property market has recorded high prices and auction rates over the last two years. But, times are now changing.
Recently clearance rates at auctions across Australia have fallen, along with home prices, which is suggesting that the Australian property market has peaked.
Nationally, data suggests that the property market reached its last low point in May 2012, and that it’s been climbing back up since then. While the Australian market is said to have peaked, price drops are not expected to occur nationwide. Sydney and Melbourne are expected to be the hardest hit as their home price increases have been the highest. Other property markets, such as Adelaide and Queensland are expected to have marginal growth over the coming 18 months.
However previous cycle data does not indicate how the current market will behave. Real estate and property experts note that all property markets and even cycles are different. Just because a market behaved a certain way 3 years ago, does not mean that it will behave the same way now. For instance, cycle values nationally rose for 3 years and 3 months in 2001 to 2004, then prices stagnated before rising for 18 months at the end of 2008 to 2010.
Home price increases are typically attributed to supply and demand. So when home prices climb due to demand, eventually the demand will ease because home prices reach a value that begins to be unaffordable. This is typically when home prices peak and the market then readjusts itself.
According to recent market data from CoreLogic RP Data, the value of homes has fallen by 1.5% across Australian capital cities, with 5 out of 8 capitals recording a price drop. Melbourne recorded the largest price drop, recording 3.5%. This city was followed by Hobart, then Sydney, Darwin and Canberra. Adelaide, Brisbane, and Perth, on the other hand, recorded a price growth of just under 1%.
Data suggests that the market peaked at 11.5% growth in April 2014, and home values have now fallen by 8.7%. Changes in figures for the capital cities are as follows for November 2015:
|City||Month %||Quarter %||Year-over-year %||Median $s|
|Combined Capital Cities||-1.5||0.4||2.8||595,000|
Source: CoreLogic RPData
Many property experts are now suggesting that the market will continue to correct itself over the coming months as it shifts from a boom period and into a transitional phase.
The market is now becoming more balanced with supply and demand starting to level out. This means that the period of panic buying has moved on. There is now less investor demand due to changes in lending laws and guidelines, which means it’s now harder for investors to buy property.
As a home buyer, these changes will allow you to select from a greater number of properties and you’ll have less competition when buying. This, in turn, will enable you to negotiate on price and possibly secure yourself a bargain.
According to Realestate.com.au, the best growth suburbs 50 kilometres from the CBD in Australia are as follows:
|Suburb||State||Bedrooms||Annual Growth %||Median $s|
Real estate experts are suggesting that the property market readjustment won’t be a major one, and that the market will return to a phase of normality, not rushed buying. Given this, it is expected that the Australian property market will now enter a phase of stability that should exist for the next 2 to 3 years.
Home price falls are expected to be moderate and not drastic. But, property experts warn that buying off-the-plan turnkey packages at today’s market prices could be costly, especially if buyers looking to hold on to the property short-term.
These buyers may find that they pay a premium price for their home, and then when the property is built that the capital value of the property is less than what they have paid for it. However, if the buyer holds onto the home for longer, then it’s highly likely that the capital value of the property will appreciate.
Are you thinking of buying a home? Then contact eChoice and find the right home loan for YOU today.
Tags: Home Loans