Feb 12, 2018
If you’re curious about what
will be affecting the property markets for 2018, you will love
today’s show, because I discuss 8 trends that will affect the
property markets for 2018.
I’m also going to teach you one
of the important laws of success which is the Law of
Accumulation.
After 5 years of soaring
property prices the forecast for our capital city housing markets
remains mixed for 2018, with property values likely to finish the
year higher than they started, but growth will occur at a slower
pace.
The fact is, 2107 produced
stronger average house price rises than many commentators
predicted, however there are now signs that we’ve moved into the
next phase of the property cycle as house price growth stabilises,
auction clearance rate have dropped and lending to investors has
slowed.
Looking forward, here are 8 trends that could shape our
property markets in 2018…
- Price Growth to Moderate -
The phenomenal price growth
experienced by Sydney and Melbourne over the last 5 years has come
to an end.
What will happen to property values
next year will depend in what the RBA does to interest rates and if
APRA tightens the screws on lending further. Having said
that…
- Interest rate will remain unchanged -
The official RBA interest rate is
likely to remain at 1.5% throughout 2018.
Australia's economy is still
operating below its potential with economic growth not strong
enough to justify an interest rate increase.
The
positive signs of jobs creation, falling unemployment and rises in
full-time employment are being offset by slow wages growth,
sluggish retail sales and a benign inflationary environment.
Fortunately, the RBA will be pleased our
property markets are cooling and will not feel the need to use
rising rates to slow the market.
- APRA is unlikely to tighten its macro prudential
measures -
APRA is getting its way…. Under its
watch stricter bank lending criteria have created a “credit
squeeze” which has stifled the Sydney and Melbourne property
booms.
But this time round the slowdown
has occurred in a low interest rate environment meaning our banks
are in a healthy financial position and loan defaults are at a
minimum.
This means it is unlikely that APRA
will need to tighten the screws further, but on the other hand it
is too early for APRA to relax its guidelines.
- Jobs growth will continue - More than 335,000 jobs were created in the past
12 months, the majority in full-time work.
And
Australia’s golden run of jobs growth is likely to continue to
underpin our economic growth.
- Strong population growth will continue - Our strong population growth will also underpin
our property markets.
Last year, Australia's
population grew by 389,100 people to reach 24.5 million by the end
of March 2017.
Demand for housing has averaged
about 164,000 dwellings per year over the last 5 years and
according to the ABS in the five years to 2021, continued strong
population growth (underpinned by net migration of 240,000 per
annum), plus some shifts in household composition (more one and two
person households), means we’re likely to grow by 172,000
households a year – a 5% increase in demand.
Over
the last year Victoria was the fastest growing state with a
population increase of 2.4% and this soaked up much of the
anticipated oversupply of new apartments in
Melbourne.
Net
overseas migration accounted for 60 per cent of Australia's total
population growth as we added 231,900 people to the
population.
Overseas migration was the
major contributor to population change in New South Wales,
Victoria, South Australia and Tasmania, whilst natural increase was
the major contributor in all other states and
territories.
- Brisbane will finally get its turn in the sun -
If
interest rates remain unchanged, APRA don’t impose further lending
restrictions and our economic growth remains steady, in the absence
of any major international surprises this is what our research
suggests is likely to occur to capital city property values in
2018:
- The Sydney property market has run out of steam, but won’t
crash like some are suggesting. Instead it is likely to grow
between +4% and 6%
- Melbourne
houses, townhouses and villa units
are likely to be the best performing market - +6% to
10%
- Brisbane’s
market will move up a notch,
spurred by jobs growth and infrastructure growth - +3% to
6%
- Hobart will again perform well - +6% - 10%; encouraged
by speculators chasing the next hotspot. But remember how hot spots
often become “not spots” – so with few long-term growth drivers, I
would avoid the Apple Isle.
- Canberra
will continue its steady
performance - +4% to 7% - but excessive land tax is a strong
disincentive to property investors in Australia’s
capital.
- Adelaide
is likely to underperform again –
0% to 4% growth
- The Perth property market may be near its bottom, but
won’t see strong capital growth for a number of years - it’s too
early for a countercyclical investment - -1% to +1%
- Darwin has very few long-term growth drivers – but
prices are likely to stop falling - -1% to +1%
Overall apartments are less
likely to perform as well as houses and will continue to be
influenced by significant levels of new stock coming on the market
ahead of demand through 2018 – steer clear of new and off the plan
apartments particularly in our CBD’s
- A fight to quality -
During the last few years FOMO
(fear of missing out) led inexperienced investors and home buyers
to purchasing almost any property that there budget would allow and
they were fortunate as a rising tide lifted all ships.
But as the market turns in 2018 we will see a
flight to quality with well located A class homes and
investment grade
properties still selling
well, but secondary properties languishing in the
market
- More property investors will sit on the side lines -
With market forecasts of subdued
growth many would be investors will be questioning whether property
still represents a smart investment. On the other hand, strategic
investors who have a long term outlook will see the period of
slower growth as a buying opportunity.
Sure
investors may not see double digit capital growth in the short
term, but the slower markets will give smart investors an
opportunity to buy the type of property they’d have to compete more
strongly for over the last few years when there were more buyers
than sellers.
The type of property that
will have them looking back in 10 year’s time saying
“boy I bought that
cheaply!”
Mindset Message: The law of
accumulation:
Understanding the laws of money
and success.
The law of accumulation says that
every great financial
achievement is
an accumulation of hundreds of small efforts and
sacrifices that no one ever sees or appreciates.
Everything you do or fail to do
will impact your results.
- Knowledge
- Getting experience
- Money
- large amounts come about by many small accumulations
Links and resources:
Our favourite quotes:
“What’s going to happen to
property values will depend on what happens with interest rates and
what APRA does to the availability of finance.” Michael Yardney
“This slowdown has occurred in a
lower interest rate environment, which means the banks are in a
healthy condition and loan defaults are low.” Michael Yardney
“Australia’s golden run of job
growth is likely to continue to underpin our economic
growth.”
Michael Yardney
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