Melbourne Property Predictions for 2016
Last year in Melbourne residential sales volumes were up, auction clearance rates were high, and house prices increased significantly.
For the first 3 quarters of the year it was most definitely a ‘sellers market’. Auction Clearance Rates hovered around 77% (even with more stock on the market in any period since 2009) and as competition amongst buyers heated up, so did sale prices. The median $ house price reached nearly $700,000 in the June Quarter, and ticked up to a record-breaking $729,500 in the following 3 months.
Come September, supply of properties for sale finally caught up with demand from buyers, and auction rates subsided gradually from 74% in September, to 70% in October, to 67% in November (when a staggering 5,700 properties were taken to auction).
In September, year-on-year price growth peaked at about 14%, then moderated through the busy Spring selling season. Dwelling values at the end of 2015 were up 11% compared to where they were in 2014. This was a great result for homeowners and investors, considering values increased in 2014 by about the same amount as well.
2016 – What to Expect
Looking to 2016, it’s impossible to ignore the heightened global economic uncertainty whirling around us (think plummeting resource prices, share market turmoil, prospects of global recession, etc.), but it’s hard to predict how this will impact the Melbourne residential real estate market beyond making everyone a bit more cautious.
A continued slowdown in China will undoubtedly affect the Australian economy, but there are different schools of thought about repercussions for foreign investment in Melbourne real estate – on one hand, fewer Chinese will have the wealth to invest, but on the other, foreign real estate investment becomes more attractive relative to Chinese domestic prospects. Time will tell.
At a national level, investment lending has eased sharply since last September. Macro-prudential initiatives from the RBA have succeeded in curbing speculative lending, and it appears that the impact of interest rate cuts in 2013 and 2014 has diminished. But while investor activity has slowed, owner-occupier lending over the last few months has increased by over 20% year-on-year. Strong demand still exists for detached dwellings in particular.
Looking closer to home, there are a number of reasons to be reasonably optimistic about Melbourne residential real estate in 2016: the VIC economy is robust and less resource-dependent than others; the state unemployment rate finished 2015 below 6%, and has been gradually trending downwards since mid 2014; net interstate migration is at its highest level in decades; and foreign real estate investors continue to see Melbourne as a top destination (particularly with an AUD at about $0.70 US).
Moving into 2016, we expect a more balanced market, characterized more by owner-occupier activity than by speculative investment. With the 3-year Sydney growth boom coming to an end, and most other states heavily reliant on a declining resources industry, Melbourne will lead the way in capital growth over the next year or two.