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Property Boom is Over, what's in store for 2016

Discussion in 'General Property Chat' started by MTR, 11th Jun, 2016.

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  1. MTR

    MTR Well-Known Member Premium Member

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    This is a good read by M Yarney, reports what actually happened in 2015 ....

    Predictions, well I think he has hit the nail on the head IMO.
    I like Melb, and already mentioned believe its the safest bet today and moving forward as per article.

    The property boom is over, but what's in store for 2016? - RealestateVIEW Blog

    The property boom is over, but what’s in store for 2016?
    Most predictions will be wrong. How do I know?

    Because they always are.

    Twelve months ago no one would have predicted the Reserve Bank dropping interest rates twice in the first half of the year fuelling our already hot Sydney and Melbourne property markets.

    Similarly, at the beginning of last year few predicted how APRA’s measures would constrain investor lending, even thought it had already started wielding its stick.

    Here’s my next prediction…

    The media will be full of negative sentiment this year, because our property markets are changing and moving into the next stage of the property cycle.

    Truth is: very few people like change and they see it as scary, so watch out for the property pessimists and doomsayers.

    2015 in a nutshell

    I believe last year will go down as the year that:

    • Our property markets were a two horse race as the Sydney and Melbourne property markets boomed
    • Interest rates fell to historic lows and investors and upgraders responded strongly to the lower cost of money
    • Our property markets were more fragmented than ever with many locations falling in value as the 2 big markets boomed.
    • Rental yields fell as rental growth remained at very low levels
    • APRA’s intervention caused banks to tighten their lending policies causing many borrowers to revise their plans
    Remember… the government engineered the property boom

    A housing boom was always part of the government’s rebalancing plan.

    While the mining boom was strong, interest rates were raised to hold back the housing and other economic sectors in an attempt to keep a lid on inflation during the mining upswing.

    Then as the mining boom ended interest rates were cut, which drove a large upswing in housing construction to help fill the gap left by mining. At the same time low interest rates encouraged us to upgrade our homes.

    However, the property booms can’t go on forever.

    Sydney and Melbourne housing prices increased by 48% and 32% cent respectively since this cycle commenced in mid-2012.

    With our low inflation rate, low interest rates and low wages growth prices this type of price growth was unsustainable and if property values kept growing at double digit rates this would eventually threaten our financial stability.

    How will 2016 compare?

    An improving economy, strong jobs growth and stable unemployment rates are likely to mean that the RBA will hold off dropping interest rates further.

    However, I expect the factors that have driven the recent pullback in housing to persist in 2016, with lower housing price growth.

    Looking into the crystal ball, it’s likely that:

    • Sydney’s property growth will slow, but the party’s not over. We’re likely to see a slower more sustainable market with property values rising in some areas, but falling a little in others
      • NSW is our strongest state economically and is creating almost as many jobs as the rest of the country combined leading to strong population growth and buyer demand.
      • There is still a relative undersupply of properties in Sydney at a time of continued demand.
      • On the other hand…first home buyers are likely to find Sydney expensive and rather than move out to the sticks, they’ll rent where they want to live and invest their money into property where they can afford to.
      • The proportion of investors buying into Sydney is likely to fall as APRA has its way.
    • Melbourne is likely to outperform all other capital cities.
      • A strong economy, more jobs and strong population growth will underpin property price growth, but this will be much lower and more fragmented than the last few years
      • There is an oversupply of CBD apartments and this will spill into some of the middle ring suburbs where the level construction of new apartments is ahead of demand.
    • Brisbane’s property market will pick up, but it won’t be the next “hot spot” that some predicted in the last few years.
      • The mining slowdown and lackluster population growth held back Brisbane’s property markets over the last few years.
      • The low Australian dollar and improved tourism outlook will be beneficial for Queensland
      • Strong rental yields and relative affordability will see investors moving to Brisbane in 2016
      • There is an oversupply of apartments looming in the Brisbane CBD.
      • Don’t count on the Commonwealth Games to boost the local property markets and avoid tourist locations and regional Queensland
    • Darwin and Perth property values are likely to weaken further, but could bottom out towards the end of the year
    • Adelaide property is likely to keep ambling along as it has over the last few years with few growth drivers to spur it along.
    • Tasmania (Hobart) property is hampered by minimal population growth and a sluggish economy. This is not an “investment grade” market.
    While there are many reasons to be optimistic, 2016 is likely to deliver some surprises, but so has every other year.
     
    Last edited: 11th Jun, 2016
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  2. Chabs

    Chabs Well-Known Member

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    By safest bet, do you mean Melb is the best city to continue looking to buy in?
     
  3. MTR

    MTR Well-Known Member Premium Member

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    Melbourne has been booming since 2013, my guess is we are closer to peak now.

    I think moving forward Melb has highest immigration and strong economy so I believe it will still be a good market for long term hold which is what most on PC do. If you are looking at other strategies, ie flipping, developing then you need to be very selective on areas as with any market that has boomed.

    There are still some affordable areas in Melb, which are in the middle ring 12-15 km from CBD that may be worth investigating further.
     
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  4. HUGH72

    HUGH72 Well-Known Member

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    Any thoughts on when Perth is likely to stabilise?
    Prices have dropped but so have rents, if yields were improving I would like to get in but not yet.
     
  5. MTR

    MTR Well-Known Member Premium Member

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    That is the $1M question and have been asked many times, as have others I am sure on this forum.

    Perth is dependent on mining and that has gone. Job losses continue to plague this State. I know so many engineers that can not get jobs, until we can create jobs its going to continue to fall or go sideways.

    Unfortunately, bust cycles last much longer than boom cycles.
    The answer is not anytime soon unless our economy improves.
     
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  6. Foxy Moron

    Foxy Moron Well-Known Member

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    Huh?
    Well I'll choose to apply that part to his above statement then.
     
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  7. Azazel

    Azazel Well-Known Member

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    If I was to guess, I would say that Yardney surmised that inner City property always performed better than properties further out.
    Even if it wasn't always the case.
    And blue chip. And investment grade. And maybe a link to his wealth retreat.
     
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  8. MTR

    MTR Well-Known Member Premium Member

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    Yes he is a huge advocate for blue chip, I disagree with this and have said this many times.

    However his comments in this article have nothing to do with blue chip property.

    We should review his predictions at the end of 2016, we are 6 months along and I think what he is saying is spot on.

    We won't know know how Brissy performs this year until it actually booms? He has stated it is moving but it won't be the next hot spot, we will have to wait and see.
     
  9. Azazel

    Azazel Well-Known Member

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    I dare say he's not buying there for his clients.
     
  10. MTR

    MTR Well-Known Member Premium Member

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    I don't know, I assume he is
     
  11. Azazel

    Azazel Well-Known Member

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    I've only seen him talking up inner Sydney as blue chip or investment grade.
    But maybe.
     
  12. ZachAnsel

    ZachAnsel Well-Known Member

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    Dont you think its too late for Yardney to come and say prediction 2016.. We're in June 2016 now???
    Perhaps in 2017, he wants to refer back to this article and saying "I told you" with cheeky smile
     
  13. hammer

    hammer Well-Known Member

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    Darwin might bottom out at the end if this year...but it can only be temporary as the gas plant construction will start winding up soon after. Gas plant employs 8000 people at the moment......
     
  14. big max

    big max Well-Known Member

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    Pretty accurate I think. Although I would be more bullish than he is on Brisbane if only for the wealth transfer arbitrage effect from Sydney and Melbourne owners to "the next spot". Also he makes no mention of Gold Coast which should perform very strongly next few years.
     
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  15. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    Sales prices and demand at opens doesnt bear that out very accurately. LOTS of investor activity, reminds me of western sydney circa 2010
     
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  16. Xenia

    Xenia Adelaide Property Manager Business Member

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    Great post MTR
     
  17. MTR

    MTR Well-Known Member Premium Member

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    interest Dave, is it the lower end? sounds like the beginning of a rising market, is it mainly investor activity
     
  18. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    Mainly investors in the low end up to 350k, above that its owner occupiers or developers for a larger lot.
     
  19. Ouga

    Ouga Well-Known Member

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    "Trying is the first step towards failure" Homer
    I don't think I have seen any of your post where you are not pumping the gold coast. :rolleyes:
     
  20. big max

    big max Well-Known Member

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    Doing my best to help you guys make some money ...
     
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