Fu­ture Tense

Mar­ket pre­dic­tions prove the crys­tal ball is never clear when it comes to prop­erty val­ues, writes Har­vey Gren­nan.

Australian House & Garden - - Contents - #

The dif­fi­culty of pre­dict­ing real-es­tate price trends.

Peo­ple in the prop­erty-fore­cast­ing busi­ness are no­to­ri­ous for get­ting it wrong, but they re­ally out­did them­selves in 2016. The real-es­tate mar­ket was sup­posed to cool, re­mem­ber?

The reg­u­la­tors and banks were get­ting tough with in­vestors, who were push­ing gen­uine home buy­ers out of the mar­ket. Home build­ing was at record lev­els, which would push up sup­ply and dampen de­mand. There would be an over­sup­ply of units, which would send prices south (this may ac­tu­ally hap­pen in Mel­bourne and Bris­bane).

But then the RBA cut in­ter­est rates again – twice.

In­vestors came back with a vengeance when they re­alised cap­i­tal gains were still alive and well. The one thing that might have helped – the re­form of neg­a­tive gear­ing – be­came the devil in­car­nate for those who have the power in Canberra.

So what did hap­pen to real-es­tate prices (of houses and units) in 2016?

Ac­cord­ing to the CoreLogic Home Value In­dex, cap­i­tal-city val­ues shot up at their fastest pace since 2009, by another 10.9 per cent (15.5 per cent in Syd­ney), and have al­most dou­bled in Syd­ney and Mel­bourne since the GFC in 2008. Houses rose in price at al­most twice the rate of units – so much for the ex­perts and the reg­u­la­tors.

How­ever, the pic­ture was far from uni­form across the na­tion. While prices rose sharply in Mel­bourne (13.7 per cent), Ho­bart (11.2 per cent) and Canberra

(9.3 per cent), the re­source cap­i­tals had mar­ginal gains or went back­wards.

Perth prices fell 4.3 per cent, while Bris­bane man­aged a gain of just 3.6 per cent and Dar­win a mea­gre 0.9 per cent. (Perth and Dar­win did show some signs of re­cov­ery in the fi­nal quar­ter of 2016.)

“Cap­i­tal-city growth rates have also shown a grow­ing di­ver­gence be­tween the broad hous­ing prod­uct types,” says Tim Law­less, head of re­search at CoreLogic. “Over [2016, we saw] cap­i­tal-city house val­ues rise by 11.6 per cent, while unit val­ues have in­creased by roughly half the pace at 5.9 per cent.

“The di­ver­gence in growth rates is the most dis­tinct in Mel­bourne and Bris­bane, where con­cerns around unit over­sup­ply have eroded buyer con­fi­dence. Mel­bourne house val­ues are up 15.1 per cent over the year com­pared with a 1.7 per cent rise in unit val­ues, while Bris­bane house val­ues are

4 per cent higher over the year with unit val­ues fall­ing 0.2 per cent.”

Re­gional Aus­tralia has not shared in the boom, with the ex­cep­tion of some coastal and lifestyle ar­eas. CoreLogic fig­ures show me­dian house prices in re­gional Vic­to­ria, Queens­land and SA rose only be­tween 0.5 and 1.1 per cent (for the 12 months to Novem­ber 2016). Re­gional WA fell 7 per cent. Only re­gional NSW did rea­son­ably well, with me­dian prices climb­ing 7.3 per cent.

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