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Australian Market Moderates – January 2018

Welcome back to a brand new year. Recent reports seem to unanimously suggest that Australia’s housing boom is coming to an end, however it appears it will be a soft landing rather than a property market crash, according to HSBC’s chief economist for Australia, Paul Bloxham.

He suggests that “a hard landing is possible, but we believe this would require a negative shock from abroad and a sharp rise in the unemployment rate. We do not see a significant local housing imbalance and view Australia as having had a housing boom rather than having a housing bubble.”

House prices in Sydney and Melbourne were growing at low double digit annual rates over the past five years, however during the past six months Sydney prices fell an average of 1 per cent and Melbourne’s annual price growth slowed to 7 per cent.

Mr Bloxham said the slowdown in Sydney and Melbourne was driven by increased supply but many vendors aspiring to inflated prices, higher lending rates for investors, wary buyers and a retreat in foreign demand, which had softened partly due to lending constraints by domestic banks and higher local taxes. HSBC revised down its forecasts for Sydney and bumped up 2018 predictions for Melbourne, given recent trends and changes in population growth estimates.

In spite of all the stresses and pressures in the market, Mr Bloxham said Sydney housing prices were tipped to grow by 2 to 4 per cent during 2018, while growth was expected to be between 7 and 9 per cent in Melbourne.

The softening of market value growth around the country will offer some relief to buyers who have been struggling with ever-increasing house prices in most major cities. But the good news for sellers is that there’s no need to panic. CoreLogic’s Hedonic Home Value Index showed that in November there was an average of just 0.1 per cent fall in capital city dwelling values but this was offset by a 0.2 per cent rise in regional values.

By its very nature, the housing market will always have ups and downs. Property identity Mark Bouris reminds us that property value is influenced by market sentiment, interest rates and economic data. While you can’t control these factors, you can control your investment timeline. He suggests viewing property investment in 10-year windows and trying to buy well.

New Zealand Real Estate I 2018: While the market has seen a shortage of stock this year, it appears there was a late spring rebound, according the Real Estate Institute. While year-on-year the number of homes sold nationally decreased by almost 9 per cent, there were 17.8 per cent more properties sold in November than October (seasonally adjusted to 4.5 per cent), representing the biggest month-on-month increase between the two months in six years.

Real Estate Institute chief executive Bindi Norwell commented, “While there was a significant increase in properties sold, November traditionally sees a robust increase, although the change in November compared to last month was stronger than we would have expected based on past data. After a difficult winter and a slow start to spring, the real estate industry has experienced a lift in optimism and activity, with increases in the properties sold in 15 out of 16 regions across the country when compared to the previous month.”

It should be noted that the long lead in to the election and delay in settling on who was to govern, as always, slowed the market and the resulting change in government further raised concerns in both seller and buyer groups.

The roll out of the new government’s capital gains tax changes, restrictions on foreign buyers and investors will likely slow market impetus. That said, much of the governmental focus is on moderating major metropolitan markets, which will experience some slowdown, while the majority of the country could well continue with the recent month’s lifts after a difficult 2017.

Providing credence to the above comment, Nelson had the biggest month-on-month turnover increase with 34.7 per cent more sales in November than October. Canterbury, Gisborne and Hawkes Bay had the most properties sold in November in 10 years and 15 of the 16 regions had record medians in the month.

 

 

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