How Residential Property is Shaping Up in 2015
By Louis Christopher on 4 Feb 2015
No Comments yet, your thoughts are very welcome
The Darwin property market is in a full blown slump and the negativity going on in Darwin has been getting worse. Vacancy rates have continued to rise over summer, rents on our numbers are now down 14% and are in a clear downtrend as shown by this chart.
The Sydney property market on the other hand is still looking strong. Over recent summers (and including this one) we have been getting the usual commentary from the usual suspects stating the market is about to slow down, is slowing down, etc. It is increasingly feeling like the boys who cried wolf. Sooner or later they will be right but right now, a slowdown currently happening in Sydney? Hardly!
I frequently speak with trusted agents in Sydney and I spent the Xmas period doing just that. All were reporting active buyers even right through the Xmas/New year week. Business was strong for them.
A slowdown will come
The real estate market cannot keep growing at a rate of 15% forever. Our forecast for this current financial year was 8-12% and I see nothing in the market to suggest it will be below that range. If the rate cut comes it will be yet another bull market for Sydney for the full calendar year.
My forecast for the opening of the Sydney real estate auction season:
Clearance rates will rise from the closing levels of the high 60’s in December. The Sydney auction market will most likely open up in the early to mid 70’s.
The Melbourne property market is looking a little stronger since our last update.
Note for example their stock on market numbers. There was a big fall in December (which is common) but the important point is stock levels are clearly lower than levels recorded a year earlier.
There has been for quite some time significant concern about what is coming onto the market in Melbourne with regard to new stock.
In the inner ring those concerns are warranted as shown by this chart.
Overall the city wide trend chart shows vacancy rates having peaked and, if anything, have slightly trended down in the last two years.
The Perth property market on our numbers is recording some conflicting signals right now.
On one hand vacancy rates are high (for Perth) and continue to trend higher. On the other, asking rents have recently trended up again. It’s unclear why rents would do this. It could be just a statistical aberration in the ongoing down market. It is possible too, it may represent a signal of a bottom in the market. Right now its too early to call it.
The sales market in Perth has been very flat/steady this year, not a great surprise given the commodities downturn. For existing property owners, the result could have been a lot worse as shown in the rental market.
With stock levels on the rise, we don’t think we will see anything but an ongoing slow market for Perth in 2015.
The Hobart property market remains one of our investment picks for 2015.
I like how vacancy rates have trended and rents have risen and I like what I see on the sales market. Nothing over Xmas/New Year has made me change that view.
A lower Australian dollar helps the Hobart ecotourism sector and also helps with their agricultural economy.
Late last year, I had the impression that perhaps Canberra was having a bottom in its rental market.
Now that we have the result in for December, I am not so sure anymore. The result was a big jump in vacancies back to 2.3%.
That said, the sales market appears to be strengthening as stock on market is trending down, implying that supply is being absorbed by home buyers.
Potentially there might be quite a few buyers who are taking advantage of rate cuts and what was a very weak market.
What does this data mean?
Overall, as the data clearly shows, there is currently no one national property market that is in sync with itself, however, there are waves sweeping through the market influencing the regions by various magnitudes.
Clearly the rate cuts of recent years have influenced the east coast more than the west coast.
There are local events which are having a greater influence on each region and I see it remaining that way for the foreseeable future.
For property investors
These are not bad times to operate in, if you do your research and study how each region is moving and what is influencing those movements.
The threat of a rapid rise in interest rates now seems remote. Of course the threat of higher unemployment is there but that’s where a study of the local market would help.
