As the summer sun heats up and 2017 gets fully into gear, I hope you’re feeling rested, rejuvenated and ready to take on a brand-new year!
The Reserve Bank met for the first time this year on Tuesday 7th February and again left the official cash rate unchanged at 1.50%.
Our first newsletter of the year sums up what we learned from the 2016 property market and what you can expect for 2017.
You may have noticed that some Lenders/Banks have increased Interest rates for certain borrowers! Don’t delay: check whether your current mortgage is still offering you a great deal – let’s have a quick chat now.
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That was then: 2016 in review
Tim Lawless at CoreLogic has summed up the 2016 housing market in just two words: ‘diversity’ and ‘complexity.’
It’s ‘diverse’ because conditions have differed radically between regions – on the one hand Sydney and Melbourne values rose more than 10%, while in Perth values trended lower.
In Canberra and Hobart, the pace of capital gains accelerated with rises higher than 8%, while Brisbane and Adelaide demonstrated more sustainable growth with values tracking 4 to 5% higher over 2016.
Across regional markets, increased buyer demand for lifestyle and tourism-centric property pushed prices higher, while markets related to the resources sector remained soft.
Yet, this diversity was counteracted by the complexity caused by diverging indicators.
Approved housing supply reached unprecedented highs during 2016 with high-rise apartment projects attracting a higher risk profile, particularly across key areas of inner Melbourne and Brisbane.
Transaction numbers have drifted lower across most state capitals, mostly due to low listing numbers in hot markets like Sydney and Melbourne. Conversely, in the nation’s weaker markets – Perth and Darwin – the downturn in buyer numbers was likely the result of less demand.
If you’re in the market for a new home, I can help! Let me lay out all your financing options so you can choose the one that works for you.
This is now: 2017 housing trends to watch for
Rising mortgage rates, a peak in the construction cycle, the potential for more regulation in the investor space, and renewed focus on housing affordability are likely to be in the property headlines this year.
• Rising rates. Mortgage rates have already started to rise, with announcements from most lenders that variable rates are nudging upwards due to higher funding costs. Higher mortgage rates have the potential to dampen housing demand and dwelling approvals are likely to have peaked over the second half of 2016.
• Construction peak. Yet, construction already underway remains substantial, particularly for high-rise projects. Largely been sold off the plan, as these projects approach completion, the risk of non-settlement may become more visible as valuations fall short of contract prices and foreign buyers fail to secure finance. Projects in good locations with a point of difference and more local owner occupiers probably won’t show the same risk profile, Tim Lawless said.
• Investment highs. ABS housing finance data shows the value of investment-related mortgage commitments has increased by almost 16% since the first rate cut this year; investors now comprise approximately 49% of mortgage demand nationally. We may see a further regulatory response aimed at curbing investor activity, perhaps in the form of tougher speed limits placed on investment growth, loan to valuation ratio limits, or geographical polices aimed at slowing investment in the hottest markets such as Sydney. Lenders may also be required to hold more capital against investment-related mortgages that would then widen the spread between owner-occupier and investment mortgages.
• Affordability. This is a topic currently fiercely debated in the public arena. CoreLogic dwelling price to income ratios range from 8.4 in Sydney to 4.7 in Darwin, indicating that affordability of housing is vastly different from region to region. The solution to housing affordability isn’t a crash in housing values but to make affordable housing. Overall, in 2017 capital city growth rates are expected to be lower than in 2016 due to factors ranging from higher supply levels, increasing affordability pressures, higher mortgage rates and softer investment demand due to regulatory changes.
In 2017, how will changing mortgage and property market trends affect you? Can I suggest that now is a great time to review your position and crunch any necessary numbers so you’re fully prepared for the year ahead. Call me and let’s book a February or March catch-up appointment.
