Property trends in 2016
The CoreLogic May Home Value Index recorded a monthly 1.6% rise in dwelling values across the capital cities. Over the first half of 2016, Australia has experienced a solid 5% increase in dwelling values to date.
A rise of 1.6% was recorded in Melbourne, a 2.5% increase Canberra and 2.2% in Hobart. It came as no surprise to see Sydney growth is still strong, with dwelling values up an incredible 3.1% over the month.
While these results may be pleasing for many home owners and investors, I don’t believe they tell the true story of the market.
Take Sydney for example. We have an interesting phenomenon where some markets are experiencing buoyant conditions while other markets are moving more slowly.
In certain pockets of Sydney, there is a lack of stock and plenty of demand. We saw 391 apartments in Sydney’s new Darling Square development sell off the plan in only a few hours over the last weekend of May, showing how keen Sydneysiders are to snap up available stock entering the market in great locations.
Looking at clearance rates from the last weekend of May, the Eastern Suburbs managed to achieve a clearance rate of 91.9% across 116 auctions. However, clearance rates are often averaged across wider regions and sometimes this doesn’t show the real picture of how fragmented the market can be – and how vastly conditions change from suburb to suburb.
Some believe that foreign investor interest is also contributing to disparate market conditions. It’s a strange situation where many have been blaming this group for the market going up and then blaming them for the market going down.
For me it’s very simple, more buyers equal more construction which equals more jobs.
I believe we have a strong domestic market regardless of whether foreign investors are buying or not and this is largely being led by record low interests rates and supply constraints.
CoreLogic data also shows some regional areas of Australia are experiencing a lift in transaction levels and home prices. Where buyers feel they may be priced out of the market, coastal and regional areas are emerging as a solution to issues of affordability. For example, the Illawarra region of NSW saw an increase of 15.8% in home values and a 13.2% increase in unit values over the March 2016 quarter.
This trend may be propelled by younger families struggling with housing affordability in bigger cities. Or, many may be cashing in on recent house price growth and using this new equity to purchase properties in lifestyle areas where they may get more ‘bang for their buck’.
I believe it will be interesting to see how the rest of the year progresses in regards to the election aftermath and the future interest rate climate.
I encourage those wishing to transact property to carefully consider their financial situation in light of this. One of the most important things to remember is adherence to a pre-determined budget, which will ensure individuals do not dangerously over-extend themselves and fail to account for potential changes in the second half of 2016.