- 7 Mar, 2016

Where are Australian Property Prices Heading?

Sure, Australian property prices are falling after massive price increases in the Sydney and Melbourne markets, but annual results over 2015 show a strong increase in property prices nationwide. However, based on recent data, property experts are now predicting that national home price growth will slow to just 2% over 2016.

National Property Prices Over the Final Quarter of 2015

Property prices in Sydney fell for the 2nd month with prestige property declining the fastest in value. According to CoreLogic RPDatas Home Value Index, prices fell by 2.3% in Sydney during December 2015.

Prestige property prices also declined in Sydney and Melbournes premium valued market. The top 25% of the market had an average price of $1 million for Sydney and slightly under $1 million for Melbourne.

During December, prices for premium dwellings decreased by 1.9%. The largest fall in value was recorded in Sydney, which fell by 2.3%, and in Melbourne, which fell by 1.9%.

Despite prices declining in Sydney, this capital city still has the highest home prices in the nation. This is said to be causing housing unaffordability, despite strong economic conditions and overseas buyer demand in the region.

Across the national market, Sydney prices fell by 1.2%, but slight rises in property value occurred in Melbourne and Perth. This kept the national average on dwelling prices flat.

Perths property market is said to be surprising with a 2 to 3% recovery rate from recent price drops. However, property experts suggest that this in only a short-term gain and that the Perth market probably wont be consistent over the next 3 to 6 months as it recovers from a rapid escalation in home prices that occurred during the mining boom.

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So while Perth property prices are still down compared to quarterly and annual data recorded in previous years, this is mainly attributed to mining activity. To get an accurate indication the Perth market, investors should be looking at long-term data that takes pre-mining boom statistics into account.

While the Perth market is currently considered as volatile, and property prices are expected to continue in a downward trend, its highly unlikely that home prices will plummet. For owner-occupiers and investors in this region, it is suggested that any property that is currently owned be held for a number of years. This will then allow the market to recover.

A strong recovery in home prices is expected to occur for Perth during the latter part of 2016. Therefore, investors and owner-occupiers who currently own property in Perth are urged to hold-off if they are wishing to sell until the end of 2016. This may help them to realise a higher price for their property.

Brisbane is said to be delivering strong results with overall property prices growing by 1%, putting this capital on par with Melbourne. Brisbane also had the highest rental yields nationwide with a 5.3% rise in apartment pricing and a 4.2% rise for houses, compared to Sydney and Melbournes average of 3%. In addition, job numbers in Brisbane are increasing, which is a good indication that the economy is improving in this region.

On the national front, home prices rise by 7.8% in capital city locations. This was the lowest%age recorded in home price gain, over a calendar year, since 2012.

Annual Price Gains on Property

Even though Sydney and Melbourne property markets have softened, these markets have still recorded high annual gains in comparison to other capital city markets. Price rises were recorded at 11.5% and 11.2% respectively.

In terms of dollar values, Sydney home owners have seen around $82,000 added to their wealth with strong capital gains. Melbournians, on the other hand, have seen the value of their dwelling grow by $60,400. Brisbane home values rose by $18,500 and Canberra by $21,900. Rental yields, however, have remained flat, except in Hobart.

Investment Appetite

A national survey of investors, developers and contractors who own property, shows that there is strong demand from overseas investors, despite weaker housing and sales activity. The ANZ Property Council Survey is forecasting that property prices will slow down, along with housing construction in most states. This, in turn, will reduce the housing industrys contribution to economic growth.

New South Wales (N.S.W), construction is expected to slow considerably. However, Victoria and Queensland are expected to remain fairly consistent.

While property investment experts are suggesting that there will be a downturn in the market, they do not expect this to be significant. There is also a great deal of speculation over whether, or not, interest rates will rise or fall. If rates remain on hold or fall, then its highly likely that home demand will increase, despite changes to lending guidelines. However, if rates increase this may escalate the downturn in the property market.

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