What a year it has been! The year has seen huge geopolitical changes that have yet shown to affect Australia’s housing market.
The housing market continues to rise due to a combination of factors, chief of which include low interest rates, increasing demand and strong investment returns in terms of capital growth.
Sydney’s house prices have increased by 10.6% over the year, which seems a lot, however when compared to the 15.6% increase over 2015 it’s clear the pace of growth has started to slow.
Can you believe that house price have risen by a staggering 65.9% since the start of the current growth phase in June 2012. An amazing amount of profit has been made in 4 and a half years.
True to the supply/demand ratio, as house prices rise, supply wanes. There were 18.2% less property transactions in Sydney in 2016 when compared to 2015, which was in itself lower than the previous two years before that.
Homes took slightly longer to sell in Sydney in 2016 than they did in 2016. An average of 32 days on the market compared with 27 in 2015. The difference is not a significant amount so it is no cause for concern right now.
There’s one question now that everyone wants answered: How long will we continue to grow? With demand showing no signs of slowing, and with no interest rate rises in the foreseeable future, the bigger question is at what pace will we continue to grow?
As we know, the single biggest factor causing the price rise is record low interest rates and successive rate cuts. But why does the RBA keep cutting interest rates causing home prices to skyrocket and creating the generational divide of housing affordability? Well, the RBA governs the entirety of Australia, including states where the housing prices are actually falling (such as Perth and Darwin). So the cuts are required there to reduce the downward pressure on home prices. It is only Sydney and Melbourne who’s prices are getting out of control.
So what’s in store for 2017? As usual, there will be the traditional doomsayers talking of financial crisis (much as they predicted for 2016 to no avail). In terms of property, whilst demand stays strong, the only factor that could harm property values would be an interest rate rise. However this looks unlikely. In fact, another rate cut to 1.25% seems more likely in the first half of 2017.
We are likely to see continued growth in the Sydney property market, albeit at a reduced amount (i.e. no more double digit returns). However an oversupply of unit constructions may slow the increase further in this segment of the market.
I’d love to speak with you personally in more detail if there are any other questions you would like to discuss. Please feel free to contact me at anytime.
From me and my team at One Agency, have a very merry Christmas and a Happy New Year!
Thanks for reading,