Property investors, home sellers and buyers should watch the market carefully as prices continue to fall in key market areas across the country. The current trend is expected to continue at least into 2021, with many analysts suggesting that a sustained correction in the housing market is taking place, based on a number of predictive indicators in the current market.
The prices of properties in Australia’s two major housing markets look to face a continuing fall due to a number of market indicators. The past 12 months has seen housing sales cool much quicker than forecasted, according to a statement made by NSW Treasurer Dominic Perrottet during his budget address.
The weighted average price for homes experienced a fall of -1.2% in Sydney, with Melbourne falling -0.6% for the March quarter. That reflects a -0.5% fall for Sydney and a rise of 6.2% for Melbourne in annual figures, according to Australian Bureau of Statistics (ABS).
The vast majority of market analysts agree that the sustained correction is likely to continue for a number of years; however, there is some disagreement about whether the market will crash or if this will be a sustained market correction.
Being the market leader and typically a good indicator of predictions, continued price drops in Sydney are potentially a sign that Melbourne will experience a similar fall in property prices. The strength of Melbourne’s economy, overseas migration demands and local area growth rate may potentially prevent such a scenario from playing out.
Stamp duty concession incentives for First Home Buyers have resulted in a noticeable surge in both cities, although national statistics indicate that this peak has already lessened.
The housing market may have also been impacted by tighter regulatory lending conditions that continue to affect investors, with these investors more likely to look to Sydney and Melbourne markets.
Average residential property prices have seen consistent growth at 2.0% (ABS) in the 2018 March quarter. The majority of capital cities have recorded declines in terms of annual growth rates, with the exception of Hobart.
Many real estate data analysts, including BIS Oxford Economics, are of the belief that market slowdowns are related to tighter lending criteria. Restrictions on interest-only loans coupled with the unprecedented building of dwelling properties have potentially resulted in a surplus in some states. However, BIS is confident that the market surplus may begin to correct as soon as 2021, due to continued population growth and migration from overseas.
Melbourne’s overall population growth has been steady, with a 2.7% increase from 2016 to 2017, now at 4.9 million people, just 200,000 short of Sydney’s 5.1 million. The current housing surplus and future property development supply are expected to be met by the increase in population, with net overseas migration considered the biggest driver, along with internal migration from Sydney and regionally.
ABS data indicates Melbourne is currently Australia’s fasting growing city, with Victoria also leading the states. According to The Weekend Australian, the Victorian State Government has been mounting an aggressive and successful campaign to attract big and innovative businesses to Victoria and to Melbourne – the ‘productive’ capital. If current growth rates are sustained over the next ten years, Melbourne – as the world’s most liveable city and more affordable in comparison to Sydney, is on course to see population growth as high as 10%.
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