2017 Property Market Reflection

2017 saw the Australian property market cap out its tremendous 5-year streak of growth and the wheels begin to reverse. Although the market is still strong, 2017 seemed to be the year that growth in the property market peaked. This was particularly seen in Sydney and Melbourne as growth began to spill into those smaller capitals of Canberra, Brisbane and Darwin.

With such a mammoth of a year and the end of an era we thought it would be good to reflect on the 2017 property market. Here are some of our reflections on what has happened, what has changed and what to expect.

 

#1 Prices Soared

2017 certainly was a year for all round growth. With the RBA maintaining a low cash rate around that 1.5% mark we saw economic activity stay strong and growth continue. This was primarily reflected in the Sydney and Melbourne markets, which after some fear of a bubble, seemed stronger than ever.

The past 5 years have seen median house prices rise by over $500 000 in Sydney and over $350 000 in Melbourne.

This constant growth has caused some housing affordability conflict, but ultimately has been backed by a strong economy.

The growth we saw was also reflected into those smaller capital cities such as Canberra, Brisbane and Darwin. These cities each saw an upward turn in their property markets. Canberra saw a property price increase around the 5% mark over 2017. This continues to show Canberra off as one of the most sustainable cities in Australia.

 

#2 The Tables Turned

For too long it seems, Sydney and Melbourne have dominated the Australian property markets. Well, November and December saw Sydney fall into a long-awaited price decline and Melbourne a large stunting in growth. The below graph from CoreLogic illustrates this more clearly for the month of October.

2017 Property Market Reflection - Australian Capital Price Growth Dec 2017

This diagram reflects Sydney’s startling second month of decline alongside a rising market in other cities. Although Canberra did fall by a negligible 0.1% this last month, it’s overall growth has been far more sustainable.

What does this mean for Australia. According to many experts this is a ‘balancing effect’ where the open market is accounting for a catch-up in the capitals outside Sydney and Melbourne. The constant fear of a property bubble is something of a red herring. Sydney and Melbourne as the major two capitals outstripped other cites in growth. But now those other cities are counterbalancing and aligning the market.

 

#3 Restructuring in the Market

With some new tax incentives and slight changes to the market structure we have seen 2017 as a year of market restructure. Personally, I see this restructure as an effective way of handling the market as it has allowed the market back to a healthy balance of investors and various forms of home-buyers.

Particularly since July we have seen first home buyers make a comeback in NSW. Primarily this was due to the removal of stamp duty for first home buyers. Hence, they have been given greater access to the market and first-home buyers are likely to be a upwards trend continuing into 2018. According to Patrick Nolan of ME Bank “With investors taking a step back, first-home buyers will find more opportunities in 2018″.

We have also seen that the large stamp duty fee and tightening of investor loans has pulled back some of the speculative or imbalanced investment. This has just slightly restructured the market to balance out investors and home-dwellers. We have also seen strong rental growth though, reflecting an increasing investor market.

Take a look at our Canberra November 2017 Market Update for more information.

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