Diversity
The Australian housing market was diverse in 2016 because conditions differed radically from region to region.
“At one end of the spectrum we have Sydney and Melbourne where dwelling values are rising at more than ten per cent per annum, while in Perth, values continue to trend lower,” said Lawless. “In Canberra and Hobart, the pace of capital gains has accelerated with both cities seeing annual capital gains rise higher than 8 per cent over the past twelve months.”
Meanwhile, Brisbane and Adelaide have shown more substantial growth, with values tracking 4% to 5% higher over the year. Across regional markets, the lifestyle and tourist-centric areas recorded an improvement in buyer demand. This increased demand has pushed prices higher, while markets related to the resources sector remained soft and are most likely approaching the bottom of what has been a considerable downturn in values and transaction numbers.
Complexity
The Australian housing market was complex in 2016 because indicators are diverging and moving in multiple directions.
“Approved housing supply reached unprecedented highs during 2016 with high rise apartment projects attracting a higher risk profile, particularly across key areas of inner Melbourne and inner Brisbane,” said Lawless.
“Transaction numbers have drifted lower across most state capitals, however the reason for lower transactions can be traced back to low listing numbers in hot markets like Sydney and Melbourne, while in weaker markets such as Perth and Darwin, the downturn in buyer numbers is attributable to less demand for housing.”
Trends to keep an eye on this 2017
Trends to keep an eye on this 2017 include rising mortgage rates, a peak in the construction cycle, the potential for greater regulation in the investor space, and a renewed focus on housing affordability.
Mortgage rates have already started to rise, with variable rates from most lenders trending upwards due to higher funding costs. Higher mortgage rates could dampen housing demand, particularly when viewed in the context of historically high debt levels, which implies that Aussie households are increasingly wary about the cost of debt.
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