It was a year of dramatic spikes in the property world, particularly the capital cities of Sydney and Melbourne, but as 2015 draws to a close, a new report promises a much more mellow 2016.
Domain.com.au’s State of the Market report, released today, says that while property prices will continue to climb next year, it will be at a much slower rate of between two and five per cent, across the capital cities.
Domain.com.au Senior Economist, Dr Andrew Wilson predicts that the markets of Sydney and Melbourne will start to fall in line with the other capital cities.
Other economists have also predicted growth in house prices will slow in 2016, to varying degrees. The Australian Business Economists executive have said growth in dwelling investments will fall to 2.2 per cent in 2016 and again to 1.4 per cent in 2017, as reported in Fairfax newspapers last month.
2016 mid-range house price growth forecasts
Source: Domain.com.au’s state of the market report
The Domain report expects interest from Chinese investors to remain high in 2016, regardless of the performance of their economy. Apartments in the inner city suburbs in Sydney and Melbourne in particular, will continue to be seen as a safe investment for these buyers.
Interestingly the report also predicts domestic investor activity will increase in the New Year, which is in sharp contrast to the recent downturn in investor lending seen in the last three months of ABS data.
The report points to high rental demand, a continued undersupply of rental properties and ongoing tax advantages as reasons why property will remain a financially viable option for investors.
Sally Tindall, money editor at Ratecity.com.au, said there was a chance the recent drops in investor lending could continue into 2016, but that it was hard to see it fall all the way to zero.
“Since July, the seasonally adjusted ABS figures show that investor borrowing has fallen by a couple of per cent each month, or a total of $2.1 billion since July 2015.
“While there’s every chance these monthly figures will continue to fall in 2016, it’s hard to see the annual growth figures dropping below zero.
“Interestingly, the overall lending figures from the ABS also suggest heat is coming out of the market.
“In the last two months we’ve seen a seasonally adjusted drop in overall housing commitments of 1.6 per cent from August to September, and a 2 per cent drop from September to October,” Tindall said.
“Just how long these drops can be sustained in 2016 remains to be seen,” she said.
The introduction of different home loan rates for investors and owner occupiers is good news for the latter, with rates up to 1.44 percentage points lower than investor rates.
“What we’ve seen over the year is that as the banks put up their investor rates, some have actually lowered their owner occupier rates, particularly for new customers.”
“If you intend to live in the home you own, and you’re willing to shop around, there are some great deals out there under 4 per cent this summer,” she said.
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