What will happen in the property market in 2018?

REA Group | 40 days ago
What will happen in the property market in 2018?

House prices slowed down, rents in capital cities became more unaffordable and interest rates remained unchanged in 2017, but what will happen in 2018?

As we move into a new year and a quieter housing market, these are the things you need to know.

1. US rate rises will make your mortgage more expensive

The Reserve Bank of Australia is unlikely to budge on rates any time soon, but that doesn’t mean your home loan interest rate will stay where it is.

In general, Australians borrow more than they save and to make up for the shortfall, our banks need to go offshore to get money.

A large proportion of this comes from the US where interest rates are well and truly on the rise. Some forecasters are predicting as many as four rate rises next year.

The impact of those rises won’t be as great as if the RBA increased rates, but there will be a flow down to Aussie mortgage holders.

Get ready to tighten those belts.

2. Sydney prices will stay flat, but prices in Hobart will rise

Sydney’s excessive housing price growth may soon be a thing of the past with demand decreasing and prices finally slowing down.

In 2018 it’s unlikely we will see a big drop in prices in Sydney, but cooling demand will continue to affect house prices which are likely to be flat this year.

eastern suburbs sydney

Sydney’s house prices are likely to be flat in 2018. Picture: Getty

In our smallest capital city, Hobart, demand from buyers will continue to grow.

The suburb of South Hobart is now the most in-demand location in Australia on realestate.com.au.

A good sign for Hobart is that rental demand is also high, suggesting that it’s jobs growth, not property speculation that is driving the market.

Look for the Hobart market to continue to rise in 2018.

hobart

The suburb of South Hobart is now the most in-demand location in Australia on realestate.com.au. Picture: Getty

3. Renters will get a fairer deal

With more people renting long term, there will be a greater focus on renters’ rights in 2018.

Being a long-term renter in Australia right now is tough due to rights issues such as length of tenancy as well as economic factors such as low wages growth.

In 2018, we will see a greater focus by both state and federal governments to make it easier and fairer for renters.

Already the Victorian Government has changed its tenancy legislation, including allowing pets and making minor modifications to homes.

It’s likely that other states will face pressures to follow suit.

The challenge will be to ensure that what is best for renters does not scare away property investors.

With mum and dad investors providing the majority of rental housing in Australia, it’s important we get the tenant/landlord balance right.

4. Investing in rental housing will be up for grabs

After some record years of investment in residential property, conditions are getting tougher for investors.

The biggest challenge is now simply getting a loan, with the restrictions on lending increasing, including who can borrow and even where they can buy.

Tax incentives also changed in the most recent Federal Budget and although the changes were small, it’s our first real indication that negative gearing and the capitals gains tax concessions will be wound back.

We all need a roof over our heads and in Australia, fewer investors equates to less rental housing and an increase in rental housing stress in our capital cities.

In 2018, we’ll see a continued focus on ‘build to rent’ as an alternative to the current supply of rental housing.

In large parts of the world, big institutions provide significant amounts of rental housing across all price points, from social housing to luxury apartments.

5. Certain coastal & regional areas will grow

Regional areas within commuting distance of Melbourne and Sydney have seen increasing buyer demand over the past 12 months on realestate.com.au.

The most active have been Central Coast and Wollongong, with many suburbs appealing to Sydney buyers on the basis of affordability if they’re prepared to do a big commute.

In Melbourne, Geelong has been the big winner of price pressures in Melbourne, however suburbs of Ballarat are now starting to appeal to first-home buyers from Melbourne as well.

This year, these areas will continue to see buyer demand grow as they offer not just affordable homes but also the lifestyle that people want.

And although many will commute, the greater movement to these regions will result in business growth.

The NSW Central Coast is now the most in-demand location in NSW for commercial property according to realcommercial.com.au.

6. The apartment boom is over but it’s not a disaster

Despite some experts predicting a ‘bloodbath’ resulting from an oversupply of apartments in Melbourne and Brisbane, the reality is that there has been minimal fall out from the declining levels of construction.

Building approvals are now trending downwards and although some apartments have lost value, the state of the market is pretty stable.

apartments oversupply

Although some apartments have lost value, the state of the market is pretty stable. Picture: Getty

This year, the level of building approvals for apartments will continue to decline.

This is mainly because there are fewer investors in the market, but also because offshore developers, particularly from China, will be less active.

The challenge will continue to be how to balance developing enough housing without flooding the market.

https://www.realestate.com.au/news/what-will-happen-in-the-property-market-in-2018/