• Investment property market update

    Investment property market update

    Property sale results in late 2015 indicated a weakening of the Australian property markets, particularly in Melbourne and Sydney where the mid-year home buying frenzy has evaporated.

    I forecast a reduction in median house price growth for 2016.

    We have seen the impact of the lift in interest rates as clearance rates have dropped and lower sale prices recorded across Australia.

    I think we can expect modest growth across the mid-range property segment, with median price growth likely to be in the range of 2-6%. I expect Melbourne and the Gold Coast to hold stronger in the 5-6% range, with Sydney, Adelaide and Brisbane all in the range of 4% median price growth. My prediction is that Perth will continue to struggle for increased value, with growth likely to be capped at around 2%. Darwin and Hobart, I believe will see modest gains of around 3%.

    Australia is seen as a strong property market by overseas investors with local connections.

    Perhaps now could be a good time for you to think about becoming a landlord and buying an investment property in 2016?

    Whilst the property market always fluctuates, (locally or on a State basis, and then from one year to another) it’s the longer term drivers that underpin growth in your real estate investment. For example, since 2005 the median established house price in Melbourne has increased by 78%. That ‘median’ house in Melbourne sold for just $320,000 back in 2005 and is now selling for $570,000 in 2015**.

    As a landlord, you need to always take a forward view. With Australia’s growing population, the demand for housing will continue to grow into the future. This is a key reason why first-time investors should consider whether real estate is an option for them to underpin their financial well-being. However you should always obtain your own independent financial advice on what is appropriate for your personal circumstances.

    Where to invest?

    My view is that real estate is a longer term investment. You don’t necessarily need to find the latest ‘hot-spot’ suburb for an investment property, remembering that this purchase is about achieving either a good rental income or potential capital growth - hopefully both!

    Your consideration set should be fairly wide. Apart from suburbs in your city, you may also want to consider regional areas or other cities.  It is also worth considering different dwelling types including houses, apartments or older style flats, depending on your budget.

    Past performance is not a guarantee of future performance.

    **Source: ABS Residential Property Price Indexes: Eight Capital Cities, June 2015 (Catalogue 6416.0). Based on original median prices of established house transfers in Melbourne for the June 2005 and June 2015 quarters.

     

     

    About the author

    • Andrew Wilson

      Dr. Andrew Wilson, Senior Economist for Fairfax-owned Australian Property Monitors and Domain.com.au is our numbers man on The Great Australian Dream. As a leading commentator on the Australian property market, specialising in housing market analysis, Andrew has a strong following with weekly columns in the Sydney Morning Herald and Melbourne Age.

      Throughout the series, Andrew will help home buyers understand what the numbers really mean and reveal the forces driving the Australian property market whilst breaking down the jargon along the way. Dr Andrew Wilson has previously held senior property and construction research positions within industry, academia and government as well as holding a PhD and Masters in Research in Housing Market Economics.

      Andrew Wilson
     

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  • Disclaimer:

    The information here is of a general nature only and is not intended to constitute financial or tax advice. You should consult your professional adviser, accountant or taxation expert for advice specific to your personal circumstances.