A new year is a good time to reflect on what’s behind us, and think about what’s coming. For those with a mortgage, or those thinking about getting into the housing market for the first time, we’ve pulled together overall trends in 2017, and delve into speculation about 2018.
According to CoreLogic analyst Cameron Kusher, 2017 saw ‘a market in transition’. Kusher reports that dwelling values rose over 12 months to November 2017, with growth slowing by the end of the year. Trends, though, were diverse across the nation.
What happened in the capital cities in 2017?
Property growth varied between capital cities.
- Sydney’s growth has previously been the strongest in the nation, but 2017 saw values down -1.3 per cent between August and November 2017. Sydney still has the highest median values for houses and units, as well as for rent, and more dwellings sold in Sydney than anywhere else. While momentum is slowing, the market in Sydney remains relatively strong.
- Perth’s dwelling values were lower in 2017, with slight growth later in the year.
- Dwelling values fell in Darwin in 2017.
- Hobart and Melbourne’s dwelling values rose significantly in 2017.
- Adelaide and Sydney’s dwelling values were lower at the end of 2017, than they were end of 2016.
What impacted dwelling values in 2017?
Low interest rates and strong foreign investment pushed market growth leading into 2017 and growth was rapid and strong. But 2017 saw growth steady, and in some parts, it slowed.
Investors, particularly foreign investors, have driven market growth, and this has impacted housing affordability. APRA implemented lending restrictions in March 2017 to address these concerns.
While owner-occupier lending remained strong in 2017, investor lending slowed, which affected the overall property market.
Growth was also affected by a large supply of apartments due to increased developments. Apartment supply is reported to have peaked in 2017, however, and there is no indication of over-supply. Increased apartment development has affected – and will likely continue to affect – rent affordability.
Outlook for 2018
With a slowing but steady market at the end of 2017, what’s in store for 2018?
CoreLogic analysts expect there will be a further slowdown of property sales in 2018. National dwelling values are likely to drop in 2018 because of drops in Sydney and some other capital cities. However, falling dwelling values come after significant growth in previous years, so a slowdown now is to be expected.
Interest rates, meanwhile, remain low for now, in a bid to help households get on top of debts and avoid mortgage stress. Households are encouraged to pay debt down while interest rates remain low. If interest rates increase in 2018, and debt levels remain high, many households will be subject to mortgage stress.
With investor lending tightened, a slowdown in house prices and increased government concessions for first home buyers, 2018 could be a good year for people entering the housing market.
If you are looking to enter the property market, or want to restructure your mortgage, chat to your Smartline Adviser today.