Back in June, Business Insider Australia reported a surge in housing prices across the country with Sydney alone reporting an increase of 5% in the prices of properties in the first five months of the year. However, later in the same month, they reported the HSBC Australia and New Zealand’s chief economist explaining that there is a slim chance for the house prices in Australia to rise any further during the year and that there may be a possible decline in the gains for rental property investors that may continue into early 2017.
Apart from these predictions there have been notable trends unfolding in the real estate market that may continue well into the years ahead. Here’s a highlight of these bigger trends in the Australian housing market for 2016.
The Slowdown in Rental Growth
There has been a considerable decline in the gains from rental properties and as we pointed out above, it is expected to continue in the coming year. With the net yield investors enjoyed by renting out housing property heading to a downside the market witnesses a decline in the investments too, as investors do not see a future growth in price that can hedge the effects of inflation for them improving their cash flows.
The Rise in FSBO (For Sale by Owner)
Considering that the returns are already on a declining trend, a number of investors are switching on to For Sale by Owner. Calculations show that removing the real estate agents from the equation can lead to a straight 22% difference in the sale price of the homes. However, even when a FSBO home may earn 22% less than an agent-assisted home sale, the seller gets to retain extra money because they don’t have to pay any commission on the sale – it’s all theirs.
The Economic Turnaround
Back when The Reserve Bank of Australia took steps to rebalance the Australian economy, they encouraged investment away from the mining industry and into the residential construction, they triggered a proliferation in the housing inventory across the country. With that turnaround bearing fruit now, there is too many homes available and the prices are going down especially in Melbourne and Sydney.
Brisbane May Outshine Sydney and Melbourne
As the major housing markets of Sydney and Melbourne report a downtrend that is expected to run into the future years, the Brisbane housing market has been showing slow yet steady growth over the years. Although there has been nothing explosive reported by the Brisbane real estate, but compared to the other states, Brisbane hasn’t recorded any seasonally weak housing transactions since June.
It’s All about the Property
At the end of the day it is all about the property. Even with the general trends in the property market taking a dip, investors need to look for neighborhoods and properties that can reap good yield for them in these circumstances. Smart investors would look for apartments and single-family homes that are expected to rise in price and demand in the future.
Taking the above mentioned trends into consideration, it’s probably a good time for real estate investors to prepare for a stunted growth in their real estate businesses. Since the prices are going down, this is an ideal scenario to research on future-lucrative properties, purchase them, and wait for the market to rise again.
Veeramachineni Lalitha
I am Finance Content Writer. I write Personal Finance, banking, investment, and insurance related content for top clients including Kotak Mahindra Bank, Edelweiss, ICICI BANK and IDFC FIRST Bank. My experience details : Linkedin