So what will be the major trends that affect Australian property markets over 2017?
- Picking apartment pockets
The biggest change to the fundamentals in 2017 will be supply especially in Melbourne, Sydney and Brisbane. These markets have experienced near record levels of dwelling approvals, over the past 12 to 18 months, and 2017 is expected to see a large number of these developments reach completion.
So is this the “oversupply” issue that has been widely talked about?
Yes and no. On the yes side, a small number of inner-city Melbourne, Brisbane and, to a lesser extent, Sydney suburbs will be “oversupplied”. On the no side, the vast majority of suburbs across all our capital cities are made up of detached houses and have seen very little, if any, apartment building occur. So if you are looking to buy an apartment in 2017 you need to “pick your pocket” carefully. Ensure that you do your research into what development has occurred within your chosen suburb and what is planned for the future.
- Rise of the renter
A combination of factors which have evolved over the past few years will culminate in 2017 to see a rise in a preference for some households to rent a property and put their search to buy a home on hold. These factors include:
Affordability Strong sales price growth has seen housing affordability deteriorate over the past 12 to 18 months. This will see some households re-evaluate their budgets and weigh up the cost of renting versus paying a mortgage.
Investor demand An increase in the number of investors buying properties over the past two years will see rental vacancy rates rise. This will provide more choice for tenants and continue to see rental growth, in general, remain flat.
New supply As identified in the first trend, the number of developments set to reach completion is expected to rise in 2017. This will see considerable growth in the number of new apartments available for rent, especially in popular inner-city suburbs.
Home rental This is a growing sector in society who preference is to rent and have no interest in owning their own home. This could be a lifestyle choice, due to affordability constraints or maybe they are investing in their own business or prefer to “reinvest”.
- Love thy neighbour
The rapid expansion of our cities has amplified the need for more dwellings and led to the densification of suburbs around Australia. This has seen councils rezone residential, commercial, industrial and rural land to allow higher density development. The rezoning of land has created the opportunity for neighbours to team up, amalgamate their properties and offer them for sale in-one-line. This trend has grown exponentially over the past two years and ongoing demand from developers for well-positioned amalgamated sites is expected to continue in 2017
- The “sharing economy”
New “disruptive” and innovative technologies will continue to shape how we live and how we interact with the built environment. This includes everything from how we control devices and appliances within our own homes to how we interact with businesses and the delivery of products and services. Looking forward these technologies and services will not only change the way we build new homes but “sharing” services will also affect the way we use our existing homes to live, make money, save money and maximise our leisure time.
- Short term and sharing accommodation services such as Airbnb are changing the way we use our spare rooms or how we rent our investment properties.
- Ride sharing companies like Uber are modifying the way we move about our cities and suburbs.
- Shared private parking rental services such as Divvy are changing the way we use our parking spots, driveways and garages.
- Shared car services such as GoGet are now being provided by councils, developers and strata managers, reducing the need and demand for private and on street parking spots The ability of these technologies and services to make you money, save you money or free up time will ensure that their take-up and popularity continues to rise over the coming year
- The cost of change
The high transactional cost of selling, buying and moving home has continued to grow. This has now reached a point where people are reconsidering and/or delaying their next property move. For downsizers, upsizers and first home buyers the additional costs associated with buying or selling a home has forced many to remain in, or renovate, their current home. Property price growth and low affordability is a key contributor to this trend; however, the biggest factor at play here is rising state government taxes, fees and charges. The growth in stamp duty is a prime example: a recent study by the Property Council of Australia found that “In NSW, the government collects more than $32,000 in stamp duty from a typical Sydney property. Twenty years ago it collected $4,685 from the same property – that’s a 750 per cent increase.” The growing cost of moving is now forcing people to stay in their current home for longer. This has major ramifications for the economy and property markets. Firstly, it reduces the mobility of the labour force, meaning that people don’t take jobs elsewhere within the state, or in other parts of the country, due to the cost of moving. Secondly, if existing home owners are not willing to downsize, upsize or move then this has a knock-on effect to the rest of the property market because it reduces the supply of properties for sale and choice for prospective buyers.