Sydney & Melbourne - What To Expect In 2018

For most of us, as the old year falls into the new, we draw breath and let the year pass review. We reflect on all that has happened and check our balance sheet to see if we did well this past twelve months.

When it comes to assessing our portfolio or the one we are vying to establish to see when and where is the best time to take action, there is always the unknown that lies ahead. As such, we have sought out a couple of experts in their markets to give us their view on how things are going and what we can expect for the coming year.

Sydney

The Sydney market has seen very strong growth in the last few years on the back of record low-interest rates, strong demand and positive market sentiment, says Sam Elbanna, MD of CPM Realty.

“However, currently, there seems to be a bit of a slower sentiment - except for astute investors and home buyers with vision.

“Net migration remains high, adding to the 5 million plus populous of greater Sydney with its already tight and prevailing housing shortage, which will see demand continuing to rise in 2018.”

Sam advised that key factors, such as APRA’s decision to stop lending based on foreign income and to restrict interest-only lending to investors, has impacted market sentiment.

“Another key factor has been the media wording when describing a slow-down in growth which has spooked the market. Growth is growth… Whether it is 5% per annum or 16%,” Sam says.

""While the reduction of overseas buyers has resulted in some relief for local buyers, demand still outstrips supply.

“Development of new apartments is being held back by government red tape - pushing out start times and restricting supply whilst demand keeps rising.

“While there has been a slowing and more buyers have started to sit tight of late, in my experience, Sydney-siders tend to overreact to good and bad news alike. Once they get over their initial reaction, things will go back to normal pretty quickly. We have seen this time and time again.”

Mr. Elbanna argues that by the later part of 2018, the banks will loosen up how they lend, once again, and investors will step into the market with renewed vigor. Demand will start to increase because they will see the rental market is very very hot, and prices will increase.

“We experienced this phenomena post-GFC when everyone thought the world had ended, and massive line-ups at rental inspections became commonplace. The massive rental shortage of 2009/2010 ultimately meant that investors saw opportunity and prices shot up and with it more market activity starting a renewed chain reaction.”

“Now, we are seeing similarities, and I predict we are getting into that stage again. You’ll see that rental market will go up quickly, investors will jump at it and prices will rise again.”

First Home Buyers

“My biggest fear is what is going to happen to first home buyers in the next 12 months. They ought to get into the market in the next 6 months before prices escalate and they are pushed out by heightened investor activity.”

Elbanna says that prices will grow again, and wage growth can't keep up with price growth, that is where I see it getting tougher for first home buyers especially.

“Sharp investors tend to buy up first, but once the masses catch on, it will be a different ball-game than we are seeing now. The 'little hiatus' from the market we are seeing currently, just means it is the perfect time to buy into the market. Astute investors know this and are taking action. Really, it is pure economics.”

“I expect that by the second half of the new year, we will see a spike in buyer activity, softening on lending criteria as banks want to maintain their market share, and for those trying to get into the market for the first time, the bar will be raised that little bit higher again.”

Melbourne

Marion Mays, who comes from over two decades in finance/lending and is the chief investment mentor for the Thalia Stanley Group says that unlike Sydney, the Melbourne market has been on a solid upward curve and is likely to continue this.

“Market sentiment has been strong and despite the changes in lending by APRA and claims that a lot of inner-city apartments supposedly sitting empty, we have seen strong buyer activity and good returns for investors.

“Property prices have been growing strong and buyer demand has not wavered over the past year despite changes to off-the-plan stamp duty obligations. For first home buyers, there have been better incentives and it has reflected in market activity.

“I feel confident that we will see the current trend continue in 2018. Perhaps, we might see some interest rate increases that could challenge those that are overextending themselves, but ultimately I suspect that we will see an ease on lending criteria later in the year.

“In the face of the age-old supply and demand cycle, I can calmly look into the future and know that this time in 2018 the sentiment will be just as strong and people that have not bought by then will look back and wish they had. Much like many are doing now looking back over the past year.

“Property investing remains a mainstay and independent of other investments and the bitcoin boom, brick and mortar has its place in every portfolio. The question is just when and how well one buys that determines the success of their investment.

“Yes, it is getting harder to identify the right investment, but there are more qualifying sources available to us nowadays if you know where to look. The most common mistake made by new investors is poor due diligence and hesitation which means time ‘out of’ the market.

“I am positive that we will see a solid year for property in Melbourne and whether you are buying a home or are investing, the sooner you get in, the better it is,” says Mays.

Without having the Chrystal ball to tell all, we can only look at past performance, the factors that have had their impact, reliable data sources and insights from experienced professionals to base our buying or investing decisions on.

Nobody can know for sure what the year ahead will hold for our property markets, yet if past performance is any indicator, we can look positively into the future.