Dwelling prices in Australia continued to rise in 2017 however at a lower rate towards the end of the year. According to Domain figures, the year (Jan '17) to September 2017 saw Sydney (+3.0%), Melbourne (+8.4%), Brisbane (+0.8%), Adelaide (+2.9%), Canberra (+4.1%) and Hobart (+8.6%) all show median house price gains. Perth (-3.2%) and Darwin (-2.8%) were down with a drop in median house prices.
The September quarter indicated the direction of the market towards the end of the year with only Melbourne (+1.3%), Canberra (+4.3%) and Hobart (+4.4%) showing quarterly median house price gains.
Year to Sep 17 Sep Qtr
Sydney +3.0% -1.9%
Melbourne +8.4% +1.3%
Brisbane +0.8% -0.2%
Perth -3.2% -1.3%
Canberra +4.1% +4.3%
Hobart +8.6% +4.4%
Darwin -2.8% -3.6%
In relation to the major capital cities, Melbourne has been the strongest standout market in 2017 now 55.5% above its previous peak and a median house price of $880,902 still some 25% below the median price of a house in Sydney. There were market concerns about oversupply in this market particularly in inner city units around Docklands and Southbank. This still seems questionable. However, the rest of the Melbourne market showed very strong growth mainly due to affordability and strong demand with the ever growing population.
Sydney which has been the strongest housing market in recent years has been affected by tighter lending conditions for investors more than most other capital cities due to the high number of investors in the market representing over half of all transactions.
Hobart is continuing to raise peoples eyebrows with year to date growth of 8.6%. Many experts are predicting another strong year ahead with so much competition in the marketplace. One local Hobart man described it as madness! However, with a median price of $409,952 it is now only 20% below the median house price in Brisbane and may not have too much further to grow given the size of the Hobart economy versus Brisbane. A prime example of a hotspot with limited long term growth factors.
Moving forward, the market in 2018 will be driven by record low interest rates likely to remain on hold with the credit market for investors to continue to remain tight.
Melbourne will be the pick of the major capital cities with growth likely only to be 2-3% lower than 2017. This is evidenced by the tight vacancy rates in Melbourne which are as low as 1.4% at the end of the September quarter 2017 and on a downwards trend. Keep your eye on Geelong over the coming months with investors seeking a market with lower prices but the ability to capitalise on Melbourne growth.
Sydney should continue to decline slightly by 2-3% in 2018 as we see a 12-18 month decline cycle (commenced in Aug 2017) with vacancy rates bottoming out at 1.9% in the September quarter of 2017. We don't expect to see a large crash as some are predicting, unless there are some drastic changes with the RBA interest rate, which seems unlikely at this point.
Brisbane has not done much in 2017 however it looks to be the sleeping giant with the added attention of Commonwealth Games on the Gold Coast this year. We will be expecting a rebound with an extra 2-3% growth in 2018 largely driven by the housing market, not the unit market, which shows continuing signs of oversupply.
Perth is showing signs it's breaking out from the bottom of it's cycle and has slowed its reversing prices in 2017. However, it will remain largely flat in 2018 and should show some good growth towards at the end of the year when tightening vacancy rates convert into rising prices.
Canberra will look to increase steadily over the coming months but expect it to be more of a plateau in the 2nd half of the year as a side affect of the Sydney market slowing.
What to do?
Talk to an expert. Sitting on your hands will achieve nothing. The right time to invest is when you can afford to. Get guidance, assess the market changes and make an educated decision.
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