On February 13, 2017

Investor outlook: What to expect from Australian property in 2017

2016 was quite a year for Australian property. CoreLogic RP Data shows that all capital cities, except for Perth and Darwin, experienced property value increases and that values in the five largest cities were up by almost 11 per cent on aggregate. 

That's not all either – the OCR dropped to a record low, residential construction continued full steam ahead and demand for property remained extremely high. However, during December and January 2016/2017, several major residential property bodies reported slight price drops throughout the capital cities – a rare occurrence that has investors on high alert. 

After the momentous year that has just passed, how's 2017 shaping up? Will the official cash rate continue to drop, and what's going to happen with property prices? With an eye to keeping investors well advised, here are our predictions for the Australian property market in 2017. 

Could 2017 be the year that you invest in Australian property? Could 2017 be the year that you invest in Australian property?

Value growth will continue in most major capital cities

There has been relentless noise in the media about a property market bubble that's set to burst coming into this year. However, most recent data and opinions from leading property analysts point the other direction. 

In fact, SQM Research's 2017 Boom and Bust report predicts that all capital cities will experience value increases (again, except for Perth and Darwin). The report provides predictions for three scenarios, the lowest being an average capital city property value increase of 6 per cent, and the most optimistic predicting a gain of up to 10 per cent (comparable to 2016's gains).

Predictions from QBE's 2016-2019 Housing Outlook and NAB's most recent Residential Property Survey also predict value gains of a more modest nature. It's clear that property's going to continue this upwards trajectory, and that by identifying growth markets and planning well, property investment can still reap considerable rewards in 2017. 

Apartment prices to moderate

Units in certain areas may be set to decrease in value thanks to increasing oversupply.

Despite the positive outlook for the housing market, units in certain areas may be set to decrease in value thanks to oversupply. The fourth quarter 2016 NAB Residential Property Survey predicts that the average unit price across the capital cities will decrease by as much as 0.8 per cent. 

Areas that are particularly vulnerable to these value drops include Melbourne, Perth and Brisbane, which are expected to fall by 2.7 per cent, 3.8 per cent and 1.8 per cent respectively. 

This is no surprise as multi-unit and apartment construction across the capital cities has been reported at record breaking rates. Last year, an incredible 117,360 units commenced construction Australia-wide, slightly higher than 2015's performance . As these are completed, supply will catch up with demand and may continue to place downwards pressure on prices.

Oversupply necessitates caution when investing in apartments, however it doesn't mean doing so successfully is impossible. With the right advice, and sound investment property market knowledge, finding an affordable apartment to invest in is certainly still achievable.  

The OCR may continue dropping

On August 2, 2016, the Reserve Bank of Australia made history by dropping the official cash rate (OCR) to an all-time low of 1.5 per cent. Commercial banks have been offering incredibly low interest rates on investment loans as a result, making borrowing to buy considerably cheaper for investors Australia-wide. 

The OCR may drop even further in 2017. The OCR may drop even further in 2017.

Industry analysts at both the National Australia Bank and Trading Economics suggest that we might not have seen the end of the OCR drops. Both sources expect that we will experience two drops of 25 basis points in 2017, one midway through the year and another in September. 

That will take the rate down to 1 per cent, a change that could decrease the cost of borrowing to buy investment property to near record lows. With the rate so low, 2017 could be the time to get on the property ladder, locking in a fixed interest rate to make the most out of low interest rates. 

Business as usual for property investors

Over the 30 years to 2015 property prices nationwide increased by 7.25 per cent on average.

With all the talk in the media of a housing bubble, and housing oversupply, fledgling property investors may be thinking now's not the time to get on the ladder. However, as you can see, forecasts for this year are generally positive and as usual the property market should continue to offer solid returns to those who invest smartly. 

With this in mind, it's also essential to know that property investment isn't a 'get rich quick' scheme. There may be dips in property values in the short run, but in the long term, prices and returns almost always trend upwards.

Reserve Bank data proves this – showing that over the 30 years to 2015, property prices nationwide increased by 7.25 per cent on average. 

Find the right property and get solid, comprehensive advice, and you too could take advantage of the Australian property market's ever-positive growth. For help making your property aspirations a reality, get in touch with the team at REIN Group today. 

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