Beginning (or adding to) your personal investment portfolio this year would have been a tricky task with 2016 starting out with numerous mixed predictions for the Australian property market experts. Will property prices continue to rise? How will overpopulation affect the market? Will interest rates remain steady? Let’s take a look at results from the first quarter of the year.
In the past twelve months Australia’s price growth rate has slowed to 6.4%, the lowest it has been since 2013. The growth rate is however above the countries ten year average rate of 5%.
Let’s take a closer look at Melbourne and Perth’s property markets. Despite the overall improvement, capital city performances are varied, illustrating the effect of mixed speed economies as well as supply and demand factors.
Median house price: $610,000; 10.7% increase in last 12 months
Median unit price: $469,000; 2.5% increase in last 12 months
Vacancy Rate: 2.0%
Melbourne leads the property growth race primarily as a result of the city’s population growth, with 60% of immigrants calling either Melbourne or Sydney home. At the same time population outflow to other states, in particular to Western Australia, has slowed considerably since the end of the mining boom.
Although property values in Melbourne have increased over the past twelve months, there continues to be an oversupply of apartments in the CBD, with many more new developments still to come. This will ultimately undermine capital gains and rental growth in these locations. At the same time, there is a shortage of apartments and homes in suburbs neighboring the CBD, which is responsible for keeping prices strong in these areas.
Median house price: $510,000; -2.0% decline in last 12 months
Median unit price: $420,000; -1.9 % decline in last 12 months
Vacancy Rate 3.9%
After a lengthy period of robust capital growth, the Perth property market has slowed during the past twelve months. Perth, in a similar situation to Melbourne, suffers from an oversupply of apartments bordering on the CBD. Although there has been a reduced rate of population growth in Perth, since November 2015 we have seen vacancy and unemployment rates decline while median house prices have risen. All signals that we can expect to see improving trends in the Perth property market.
The Keys to Success
As we can see from the latest results, some property markets and types of dwellings have seen minimal growth over the past twelve months while others have prospered. What this means for investors is that they will have to pay close attention to their due diligence processes to ensure they buy the right type of property in the right area.
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The information provided is of a general nature and is not intended to be constituted as financial advice. We recommend that you seek independent advice from qualified professionals before employing any strategies outlined.