News & Media

January 2017 Newsletter

2017: WHAT LIES AHEAD

Welcome to the new year! The summer holiday season will soon draw to a close and kids will go back to school. And after Australia Day, Sydney’s housing market will wake up from its holiday siesta. Of course many people are wondering what the new year will hold for the market.

If the end of the 2016 selling season is anything to go by, we’re in for a healthy start. The final weekend of the season posted robust auction results in Sydney, even though the number of auctions in the final week before Christmas was understandably fewer.

Many are upbeat about 2017. SQM Research’s Louis Christopher is forecasting double-digit price gains for Sydney in 2017 – although he has warned of a “hard landing” if financial regulators do not curb mortgage lending.

In its annual Housing Boom and Bust report, SQM Research forecasts that Sydney housing prices could rise by 18% in 2017. According to senior analyst Louis Christopher, wealthy home owners will drive the growth in sectors of the Sydney and Melbourne housing markets, but the level of house price growth will depend on what the Reserve Bank does with the official cash rate (see below scenarios).

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Source: SQM Research         

While Sydney and Melbourne – whose markets are being driven by the country’s fastest growing economies – are expected to have strong growth, other capital cities are not expected to enjoy the same price gains.

However, for Sydney it’s not a case of “one size fits all”. House prices in Sydney’s east and lower north shore have been outperforming the outer ring suburbs.

Overall, Mr Christopher believes the country’s housing markets are overvalued. “Whether one considers rental yields, housing prices to wages, housing price to nominal GDP – they all paint the same picture of a deeply overvalued [national] market,” he said.

The key drivers, he said, include population growth, long-term supply restrictions, plus easier and cheaper access to housing credit. And because of our low interest rate environment and Australians’ ability to service higher housing debt, he sees property prices rising further this year. He has warned the RBA to take action “sooner rather than later” in order to cool off the housing market before a potential bust in 2018.

In an interview with Smart Company, Mr Christopher said: “In my opinion, the RBA will need the Australian Prudential Regulation Authority (APRA) to rein in credit lending once again, or lift interest rates, or do both, and they need to take action sooner rather than later,” he said.

“Affluent areas tend to be driven by the prosperity of local economy. And right now, both Sydney and Melbourne have the fastest growing economies in the nation.

“APRA’s actions last year to rein in housing investment credit growth worked. [But] tapping on APRA’s shoulders once again could be a little more complicated this time around as it will need to involve restricting owner-occupied credit growth – something which the banks will be more reluctant to mess with.”

Mr Christopher believes potentially putting in additional deposit requirements to purchase a home, or in a worst case scenario perhaps having to lift interest rates, might be required.

Right now we’re just at the start of the year, so let’s see how it pans out.

THE TRUMP EFFECT

On Friday January 20, Donald Trump becomes the President of the United States of America. There’s been plenty of conjecture about what it might mean for Australia’s economy and, drilling down further, the housing market.

One potential impact could be an increase in the level of foreign investment. The United States is already the second-biggest foreign investor in Australian property, with $7.1 billion worth of applications approved by the Foreign Investment Review Board in 2016. Whether this will increase as a result of the US election remains to be seen. However, soon after the election result, many real estate agents did notice a marked increase in online enquiries from Americans about moving to Australia. Australia is viewed as a safe-haven destination by many because of its stable political environment and strong banking system.

Where the greatest increase in investment is likely to come from is China. If Trump introduces measures to curb trade or increase tariffs on Chinese imported goods, Chinese investors may decide to forgo any other form of investment in the US and look to Australia.

AMP Capital chief economist Shane Oliver said in an interview with news.com.au that the outcome of the US election is likely to see an increase in Chinese interest in Australian real estate. “It is probably more significant than Brexit,” Oliver said. It could push up house prices, he added. 

“The problem is that anything that adds to demand in an already hot market is a bit of a problem in the sense it pushes prices further into unaffordable territory for ordinary Australians,” Oliver said.

Oliver said it is likely Australia will get an initial surge in interest from Americans looking to potentially relocate, but it will probably die down as people wait to see what happens. “If they are then unhappy with what happens then it might surge again,” he said.

WELCOME TO OUR NEW STAFF MEMBER MARIO NUCIFORA

PROPERTY MANAGER  Mobile:  0401 775 765

We would like to welcome Mario Nucifora to our Property Management team.

With more than two decades of working in real estate, he brings vast experience and invaluable knowledge to his role.

Mario is a committed and caring property management professional with meticulous attention to detail.  He is passionate about providing excellent customer service and treating all clients with respect and integrity. He has a detailed understanding of property management and provides clients with reliable advice to help them make the most from their investments.

 

 

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