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Andrew Bell’s Market Update: How Long Will Property Growth Continue In Australia?

MARKET WRAP
Issue 9   |   April 27th, 2017  |  How Will Property Growth Continue in Australia?

Lots of talk about the real estate market continues, and over many aspects, but none greater than how long can this strong growth continue throughout the country.

The latest NAB Residential Property Survey reflects sentiment as at the end of 2016. Regrettably, to try and get a survey nationally takes a bit of time and so this is the most recent on that scale.

Expectations for price growth have been scaled back in New South Wales and Victoria, although they continue to lead the country. What was interesting was the expectation for Queensland is that price growth will accelerate whilst, not surprisingly, the forecast is that Western Australia will continue in negative territory.

The fourth quarter of last year saw foreign buyers increasing their presence in local housing markets for the first time since late 2015, accounting for an estimated 10.9% of new home sales, 7.6% of established home sales, and with the buyers most notable in Victoria and less so in Queensland.

NAB Group Economics has lifted its national price growth forecast for 2017 to 3.4%, and price forecasts for apartments up just .8%.

However, NAB Chief Economist, Alan Oster, says he expects the housing market to cool noticeably in 2017, especially for apartments. He is of course talking in terms of a national perspective, rather than region by region. I think this is great news because so many markets have been growing at such strong rates that we know it is putting pressure on households, and we certainly do not want to see that lead to a poor outcome.

We have to remember these surveys run off feedback from mums and dads around the country, but we also have to remember that these are the people who are buying and selling. The overall confidence levels in the survey improved a little bit by State. Confidence has improved in Victoria and Queensland relative to the last survey but this was offset by much weaker confidence in South Australia, Northern Territory and a small fall in New South Wales.

The average survey expectation for national house price growth over the next 12 months was 1.2% and interestingly the average survey expectation for house price growth in 2 years’ time was fairly solid.

The survey also found that around 55% of all property purchases, made by foreign buyers, in the final quarter of 2016 were for apartments, with only 30% for houses and 15% for land for redevelopment. You can see why there has been so much focus in this development phase for the construction of apartments. It is also important to remember that without these foreign purchasers many of these developments would never occur, because developers would not have the confidence that the local market is strong enough to absorb all the sales. Without the 55% foreign purchase component, there would not be the 45% available for local Australian’s to buy, and so there shouldn’t be the distain for foreign buyers but they should be embraced. They are an important part of ensuring more development is done for the good of all.

An interesting survey, certainly supporting the strength and a broader stability in the current property market.

That is all for this week. I look forward to catching up with you in two weeks time.

Kind regards,
Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group

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