House prices have surged in our big cities recently, thanks in part to the return of investors to the property market.
Thanks to attractive incentives like low rates and good lending conditions over the past six months, the market has been ripe for investing.
But how will things shape up for investors in 2020? Here are some things to consider.
Further interest rate cuts?
The RBA recently announced it would keep the official rate on hold at 0.75% for December. However, some predict it will lower again in 2020.
For instance, Your Investment Property magazine predicts the market will slow again in the new year, and another rate cut may occur in February or March.
The future of interest rate cuts depends largely on the prosperity of the economy over the next few months.
Listings will be limited but prices will rise eventually
Experts predict home owners will remain hesitant to put their homes on the market until they’re confident prices have peaked. This means the beginning of the year, at the very least, will have a low level of listings.
A low number of listings means that listed properties aren’t likely to stay on the market for very long.
That’s not the end of the story though. CEO of Starr Partners, Doug Driscoll,infers more listings will go up towards the end of 2020 as prices rise.
“For this reason, Sydney property buyers might be rewarded with more stock at the end of 2020. Once this happens, prices will creep closer to their early 2017 levels though won’t quite reach them,” he said.
In fact, property prices may rise between five to 10% by the end of 2020.
If you’re investing in apartments in 2020, be sure to do your due diligence.
Following a number of high-profile apartment building issues in 2018 and 2019, stricter construction regulations and even a royal commission may be on the cards next year.
“Last year’s Opal Tower crisis and this year’s Mascot Towers event has heightened the spotlight on build quality. This will continue in 2020, as the State Government begins to implement the first tranche of its building reforms,” Driscoll said.
“But as these reforms will only apply to buildings yet to be constructed, the problem of build quality will continue to make headlines.”
The silver lining is that hopefully current and future apartment developments will be in tip-top shape.
Having said that, Savings.com.au reports that Propertyology Head of Research Simon Pressley, predicts that high-rise apartments in high density suburbs are not a great investment choice. Pressley stated that “zero growth and even substantial losses are highly possible” for apartment owners over the next decade.
Driscoll also suggested that the needs of millennials will be on the minds of developers and landlords.
One example is that there will be an increase in small homes to cater to downsizers and those entering the market.
Furthermore, landlords are converting properties to multiple occupation homes, that are essentially like private dorms in which some common spaces, like the kitchen, are shared among otherwise independent rooms or dwellings.
The future is eco-friendly
When looking to invest in a property, don’t underestimate forward-facing technologies and design and this includes environmentally sustainable features.
Many new developments are looking to incorporate sustainable solutions to their design as this becomes more important to buyers, Forbes reports.
According to the National Association of Homebuilders, homebuyers want and will pay more for sustainable features like energy-efficient appliances, windows and the like, alongside features that ensure better air quality. https://t.co/XdBxeXRXMf— Dave_iPhink (@Dave_iPhink) July 1, 2019
To start, renewable energy sources will be a top priority, as will elements like plant life, green spaces, and thoughtful heating and cooling solutions.
Related Text: 5 retirement hotspots for your next investment property
Look to commercial property
The Knight Frank’s Outlook 2020 Report predicts there will be a high investor demand for commercial property thanks to its promising returns. The report predicts returns will exceed 10 per cent in Sydney and Melbourne.
“As a result of a sharp downward shift in interest rates, and the prospect of further RBA action, we expect the investment market will drive to new highs in 2020, prolonging the property price cycle,” Knight Frank’s chief economist Ben Burston told AFR.
“Compared to 12 months ago, this represents a significant change in the outlook when many had thought, including us, that the current cycle of broad-based yield compression was coming to an end.”
Words by Rebecca Mitchell
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