{"id":7784,"date":"2016-04-27T01:00:45","date_gmt":"2016-04-26T15:00:45","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=7784"},"modified":"2016-04-27T01:00:45","modified_gmt":"2016-04-26T15:00:45","slug":"boom-over-market-turns-flat","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/boom-over-market-turns-flat\/","title":{"rendered":"Boom over – market turns flat"},"content":{"rendered":"

 
\nDr Andrew Wilson<\/strong> from Domain takes an overall view of the national market and says we have a new reality in the Australian housing market as he predicts the boom times are behind us and the market is likely to flatten.
\nTranscript:<\/strong>
\nKevin<\/b>:\u00a0 <\/b>As we continue to look around Australia at the different markets and what\u2019s ahead for us \u2013 a bit of a mixed market, a bit of a mixed bag \u2013 as you\u2019re probably already hearing, let\u2019s get a national overview. Joining us, Dr. Andrew Wilson, Chief Economist at the Domain Group.
\nAndrew, thanks for your time.
\nAndrew<\/b>:\u00a0 Thank you, Kevin.
\nKevin<\/b>:\u00a0 A little bit different in the show this time. When we talk to you, we\u2019re going to look at a national view. Normally, when we talk, we talk about auctions and so on, but a bit of a mixed bag all around Australia is what we\u2019re hearing. There are some cot cases, and there are some areas where it\u2019s still ticking along quite nicely, Andrew.
\nAndrew<\/b>:\u00a0 Look. I think the big picture, Kevin, is that we have a new reality in our housing markets this year, particularly if we look at the capital city energy, and that is that we\u2019re certainly getting a convergence of growth rates.
\nThe great booms in Sydney and Melbourne are now behind us, and I think we\u2019re going to generally see a flattening of house price growth this year. I think that house price growth through the cycles now will be in a range of perhaps 2% to 4%, 2% to 5%, depending on local conditions. I think we\u2019re going to have quite a flat year this year.
\nA lot depends, of course, on the underlying drivers, and that particularly means interest rates, but I think that even if we did get a cut in interest rates, it wouldn\u2019t revive markets to the extent we\u2019ve seen in previous cycles.
\nMarkets are a lot more predictable, a lot more certainty, and I think that buying and selling decisions will reflect individual factors rather than whether it\u2019s a good time to buy or sell. So look, a quieter year this year for prices growth, particularly in Sydney in Melbourne, and as I said, I think the future is a future of modest price growth, and I think we\u2019re seeing that evolve now early days in the year.
\nKevin<\/b>:\u00a0 Some cot case markets, like Northern Territory, probably Western Australia, South Australia, maybe even the ACT. Would you categorize those as fairly tough markets right now, Andrew?
\nAndrew<\/b>:\u00a0 There\u2019s no doubt that the down turn in the resources sector has impacted the Darwin and Perth markets, and the particular factor there was the waning of the fly-in, fly-out mobile work force. That really did create significant levels of demand for property, whether rental property or for purchasing. With the downturn in the resources sector, that\u2019s certainly taken that demand away, and we\u2019ve seen prices in the Perth market at their lowest levels for two years and certainly down, as well, as in Darwin.
\nBut look, I expect those markets to start to bottom out this year. I think the rate of decline will start to actually moderate, and I think that there may be some capacity for some small prices growth towards the end of the market. I think what we\u2019ll see in Perth and Darwin is the value buyers starting to recognize that there are good opportunities to get into the market at the bottom of the cycle.
\nKevin<\/b>:\u00a0 Yes, if you\u2019re willing to get in now and hold for a while, it\u2019s obviously good buying with low interest rates, as well. How would you describe investor sentiment right now?
\nAndrew<\/b>:\u00a0 Obviously, we had higher interest rates last year, Kevin, which took the top off that investor market, which was very strong, particularly in Sydney. But investors were quite strong right across the board. Investors were activated with those low interest rates.
\nWe have seen a slight sense of a rebound after a falling away of investor activity, and I think that investor activity will be quite solid this year continuing forward. Yields, even though they\u2019re between 4% to 5% in most markets, are still attractive when compared to underlying yields for other asset classes in the economy, and of course, there are still significant taxation advantages for being a residential property investor. I think that we\u2019ll continue to see quite reasonable activity levels going forward in most capital markets this year.
\nKevin<\/b>:\u00a0 Now, you\u2019ve just released your rent report, too. What did you learn from that? What did that tell you?
\nAndrew<\/b>:\u00a0 Very interesting results in our March Quarter Rent Report, Kevin. We\u2019ve seen that unit rents are actually on the rise. We recorded unit rent increases in Melbourne, Sydney, Canberra, and Hobart.
\nIt\u2019s been a little counterintuitive because we\u2019ve seen strong development of high-rise apartments, particularly over the last two years in those eastern seaboard markets. Most markets have seen higher levels of apartment development, but it\u2019s certainly having no impact on demand for rental properties.
\nWhat I think we\u2019re seeing in a lot of those eastern seaboard markets, there\u2019s a shortage of houses for rent, and I think we\u2019re seeing tenants starting to pick or choose as an alternative units, and that\u2019s pushing rents up.
\nKevin<\/b>:\u00a0 Where is the best buying right now if you look around at some of the cap cities, Andrew?
\nAndrew<\/b>:\u00a0 As I said, I think we\u2019re looking at the bottom of the market in Perth, so opportunity is knocking there. I think sellers would be quite ready to deal in those markets. Some of the underperformers have been quite strong over the last 12 months \u2013 I\u2019m talking Canberra and Hobart.
\nHobart has been a market that has revived over the last year. Hobart offers the highest yields of any of the capital cities at the moment and still upside for capital growth. But investors tend to look sideways at that Hobart market. Perhaps, they will take a closer look this year, particularly given it remains the most affordable capital city market in the country.
\nKevin<\/b>:\u00a0 Yes, interesting that both Hobart and Brisbane were tipped as probably some of the best investment markets, and you\u2019re right; I think Hobart traditionally has been overlooked. Why is that do you think?
\nAndrew<\/b>:\u00a0 Perhaps it\u2019s an off-shore market, Kevin. It has had problems with its economy. Of course, traditionally, it has had the highest unemployment in the country. It still has high unemployment. But there\u2019s a definite chronic shortage of rental properties or houses in Hobart. Its vacancy rate is now at 0.7%, and that\u2019s very, very low. There\u2019s no wonder that rents are rising at the fastest rate of any of the capital cities down in Hobart.
\nAlso, prices are rising, and I think that\u2019s a reflection that that market was flat for a couple of years when interest rates started to fall, so it\u2019s in catch-up mode. I think there are some good opportunities there in the Hobart market, particularly given that markets such as the other resource markets of Western Australia and the Northern Territory have been flat.
\nBut look, I think there are still reasonable opportunities for investors in most capital city markets. I think the positive fact is that we\u2019re not looking at any of those extreme price scenarios that we\u2019ve had over recent years. There\u2019s a lot more stable capital growth prospects in most capital city markets.
\nKevin<\/b>:\u00a0 Andrew, great talking to you. Thank you very much for your time.
\nAndrew<\/b>:\u00a0 Thank you, Kevin.
\n <\/p>\n","protected":false},"excerpt":{"rendered":"

  Dr Andrew Wilson from Domain takes an overall view of the national market and says we have a new reality in the Australian housing market as he predicts the boom times are behind us and the market is likely to flatten. 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