2012 is set to be a year of recovery and consolidation for most of Australia’s property markets.
BY RICH HARVEY
Some areas will enjoy solid growth driven by latent demand or resources while other areas will languish.
Last year’s market was dominated by natural disasters, mixed economic signals and fragile consumer sentiment. Australian Property Monitors (APM) noted that national median house prices were down by 4.2 per cent but were predicted to rise by three to five per cent in 2012.
Sydney’s median house price only declined by 0.9 per cent last year compared to 3.1 per cent in Brisbane, 1.2 per cent in Melbourne, 2.2 per cent in Perth, 1.4 per cent in Adelaide and 3.5 per cent in Darwin.
The traditional spring selling season in 2011 did not eventuate. It was more of a fizzle and pop that saw lacklustre results. Auction rates hovered around 50 to 60 per cent during 2011. Year on year results from October saw Sydney’s median house price fall 2.3 per cent as reported by APM. In contrast, Rismark International house price model recorded a 0.5 per cent decline in median house prices over the year to the end of November. Sydney was one of the most resilient property markets of all capital cities over 2011. Brisbane and Melbourne recorded 7 per cent and 5.6 per cent decreases respectively over the same period. Rismark International recorded a very small 0.1 per cent increase in national house prices in November, which is signalling a projected rebound in property prices.
Here are my predictions for the year ahead:
• The national economy is set to grow strongly on the back of the mining and resources sector. Treasury estimates are for around three to four per cent growth in gross domestic product (much to the envy of the rest of the developed world).
• Immigration is likely to increase as the demand for skilled workers intensifies from economic growth. This will flow on to increased housing demand.
• The prestige market will continue to struggle to gain traction. With a subdued sharemarket, the level of executive bonuses is limited and buyers are cherry picking the stock that’s available at the top end of the market.
• Affordability will continue to be an issue for households on average incomes. However, interest rates are likely to decline in the first quarter of this year, which will improve market confidence and turnover. I’m tipping around a 0.5 per cent reduction in rates this year.
• Sydney’s median house price is likely to increase by around five per cent this year, spurred on by the chronic undersupply situation and extremely tight rental vacancies. Expect rents to continue to rise and confidence to resume once lower interest rates filter though the state economy.
• Perth is also likely to experience solid price growth, created by the record levels of investment in the resources sector. APM predicts growth of five to 10 per cent on the back of low construction levels and a flood of new workers chasing higher paying jobs in the mining sector in Western Australia.
• Melbourne is likely to go sideways in terms of price growth in 2012, following several years of strong price growth and large numbers of new apartments entering the market. Its median house price at $533,000 is just $100,000 behind Sydney at $643,000. APM expects price growth of up to three per cent.
• Brisbane this time last year was under water with the devastating floods. Key price drivers including interstate migration, reconstruction programs and the massive resource sector investments in regional areas should see solid price growth in Brisbane of over five per cent.
• Adelaide is a bit like a lady in waiting for the resource sector investment to really take effect. The announcement of the Olympic Dam site expansion augurs well for potential growth in Adelaide and surrounds. APM predicts growth of up to 3 per cent.
• Darwin has solid prospects for capital growth due to a significant housing undersupply, but is a much more volatile market due to the seasonal nature of employment patterns with its defence and resources sector industries. APM predict growth of five to 10 per cent.
The potential impact of the European debt crisis continues to plague consumer confidence. If credit markets are affected, then property price growth will be subdued in Australia because the cost of bank funding will be higher. If credit flows more easily, then property prices have more ability to rise.
While economic uncertainty continues to abound, the savvy investors are out there following a strategy, researching opportunities and positioning themselves for further growth. It’s important you have the right panel of experts on your side to help you navigate the way forward, whether you’re a homebuyer or property investor in 2012.
What are your predictions for this year? Do you think prices will rebound, or will consumer sentiment continue to impact on the market?
Rich Harvey is a buyers agent, economist and CEO of propertybuyer ®. Rich was awarded the 2009 national “Buyers Agent of the Year”, the “Award for Excellence” 2004-2008 by the REINSW and the 2007 National Telstra Business Award. Find your next property faster: http://www.propertybuyer.com.au