Experts have said that 2016 was the year that the Australian housing market would begin to fall, but there was little proof of this in Sydney and Melbourne where property values rose over 15% and 13% respectively.
The annual gains were encouraged by a sudden increase in prices over December after more modest gains in November—an outcome few had expected. With a capital growth of over 10% for 2016 across the five largest capital cities combined, it’s not hard to see why investors’ call for residential property has remained strong, in spite of regulators’ efforts to moderate demand by regulating finance.
Combining gross rental yields and capital gains, CoreLogic says that housing as an asset class made a total annual return of 14.7% based on the combined capital cities results.
These returns would have been distinctly higher for Sydney and Melbourne (19.2% and 17.1% respectively). Putting this into perspective, the mean balanced superannuation fund gained about 7.2% over the same period and the share market was up by 7%.
Sydney was the more powerful performer, while Melbourne, Canberra, and Hobart were slightly down. Meantime, Brisbane and Adelaide recorded healthy but more controlled growth of 3.6% and 4.2% respectively. The weakest performer was Perth, down 4.3% over the year.
Regional Australia staggered along, procuring 2.8%. However, there were varying patches, such as Western Australia where mining town property worth has diminished considerably following the end of the mining boom.
The rise in the value of apartments was much weaker than in houses. The other aspect to the versatile property market was that value gains in units were far more feeble than in houses.
“Melbourne house values are up 15.1% over the year, contrasted with a 1.7% increase in unit values, while Brisbane property values are 4.0% higher over the year, with unit values dropping by -0.2%,” reported CoreLogic.
However, the total outcome for the year shows that this housing pattern (which started in 2012) is lengthier and stronger than economists had anticipated.
So exactly how long will the growth last? Forecasts are now insisting that 2017 will be the year that property growth struggles to advance. We are already seeing signs that banks are beginning to raise interest rates on some loans, although this hasn’t occurred yet for owner-occupiers.
However, banks are claiming this will happen even if there is a lack of an official rate increase from the Reserve Bank. Some new stock in 2017, especially in the apartment market, will also set some much-needed decreasing stress on prices.
Although the property boom is not likely to implode any time soon, perhaps it will noticeably shift in 2017 as the rise in prices begins to ease.