Time to bloom: Spring 2016 Property Outlook
Spring has always been considered a good time to sell a property. Everything is in bloom and looks brighter. But spring can also attract a flood of properties onto the market, making it harder to catch a buyer’s eye.
Last spring left some sellers disappointed. After surging for much of 2015 (particularly in Sydney and Melbourne), the growth in property prices slowed just as the weather began to get warmer.
What happened last spring?
After rapid gains, CoreLogic says property price growth across Australia slowed to 0.9% in September 2015 following mixed performance across capital cities. The market continued to stagger along, with prices growing a sluggish 0.2% in last three months of the year. They then dipped by 0.2% in the first three months of 2016.
However, things began to turn in April, with a revival in some capital cities such as Sydney. As a result, CoreLogic says capital city dwelling values grew 6.3% over the first seven months of this year. It’s possible this was helped by the July Federal elections – and political uncertainty over negative gearing and the capital gains discount – as would-be sellers deferred from putting their homes on the market, creating a lack of supply.
What can we expect this spring?
The recent interest rate cut is unlikely to have a big impact as major banks are passing on only part of the reduction. Much will depend on whether there is a surge in listings as those who hesitated over the election campaign now list their homes.
“The uncertainty created by the longest election campaign in half a century, and recent state government decisions to increase property taxes are taking a toll,” notes Ken Morrison, CEO of the Property Council of Australia. He says the sector is feeling the effects of tighter lending conditions by the banks and all states are reporting strong falls in expectations of debt finance, with the exception of South Australia.
A recent NAB survey also shows that foreign purchases of new property fell for a third straight quarter to their lowest level in two years. Foreign buyers accounted for 10.4% of new property sales in the second quarter of 2016, down from 11.8% in the March quarter and 12.8% a year ago.
Near-term upside for Sydney
Whether these developments will start to bite by spring is anyone’s guess. In the near-term, the outlook is still positive. Moody’s Analytics expects house values nationwide to rise 6% this year and 4.1% in 2017.
It says much of the increase will be driven by continued gains in Sydney. Melbourne’s market, however, is considered to be nearing a peak and could be about turn. Looking ahead, NAB chief economist Alan Oster forecasts a gain of 5.1% in house prices this year, followed by 0.5% growth next year. But he doesn’t expect a sharp correction unless there’s a sudden shock that boosts unemployment or interest rates.