House prices in Australia have increased by 6556 per cent since the 1960s, an average of over 8 per cent a year, according to BIS data. This constitutes one of the largest house price upswings of all time.
However, the OECD has recommended that the Reserve Bank begin tightening monetary policy in late 2018. This could reduce demand for housing and push prices down nationwide. Furthermore, the Housing Industry Association forecasts that the rate of new home building will steadily fall over the next two years, which suggests that we may be reaching the end of a boom period.
With that in mind, what do the experts expect for Australia’s biggest capital city housing markets over 2018?
Over 2018 house prices in Sydney will fall by 1.1 per cent.
For the last five years Sydney has seen unprecedented house price growth, and as of January 2017 it was ranked by Demographia as the 2nd most unaffordable market in the world.
Those looking to buy Sydney property in the future will be happy to know that prices are not expected to continue increasing.
In fact, the QBE Australian Housing Outlook forecasts that over 2018 house prices in Sydney will fall by 1.1 per cent, while unit prices will fall by 0.6 per cent. The future of average rent prices in the city are less certain, however, predictions indicate that high levels of apartment construction will help to reduce them.
Melbourne also had the dubious honour of ranking as one of the least affordable housing markets.
Melbourne also ranked as one of the least affordable housing markets in Demographia’s analysis, coming in at sixth. It comes as no surprise as house price growth rates in the Victorian city have recently surpassed Sydney’s.
That growth is expected to continue in Melbourne next year, albeit at a more subdued rate. The National Australia Banks’ Residential Property Survey forecasts that prices will increase by 5.5 per cent over 2018 with an even slower rate of 3.4 per cent expected the following year.
Units and apartment prices are also expected to increase in value over 2018 – at a rate of just 1.2 per cent – before falling slightly the following year.
Brisbane’s market has grown steadily over the last few years, with price increases of 2.7 and 3.1 per cent over 2016 and 2017, respectively. 2018 will continue that trend according to NAB forecasts, with another minor price rise of 1.9 per cent expected.
Units and apartments fare slightly worse, with large additions to supply driving an average price decrease of 1.8 per cent next year. This fall in unit prices may also be helping subdue average rental increase, which are expected to come in at a total of just 2 per cent in Queensland over 2018.
Just like Brisbane, Adelaide is a steady performer when it comes to house prices. Over 2018 and 2019 that will continue, with house price increases of just 1.7 per cent per year forecasted by the NAB’s industry experts.
Unit prices will behave similarly, increasing by just 0.5 per cent per year until 2020. Rent increases will also be subdued – forecasted at under 1 per cent over the next year.
That’s why if you’re investing in property in Adelaide it’s essential to buy in areas where demand is unusually high, otherwise you can expect limited capital gains.
During Perth’s mining boom, money flowed into the region and houses were built at near record rates. However, when the mining industry began to leave the city in 2015 demand for housing left to, causing three consecutive years of house price decreases from 2015 to 2017.
Rents prices in Perth are expected to stay the same after two consecutive years of decreases.
It appears that downturn may be coming to an end with a small increase of 0.1 per cent expected in 2018. In the following years, house prices are even expected to increasing at a gradual rate.
However, units are not expected to perform quite so well, with prices forecasted to decrease over the next two years. Rents prices in Perth are expected to stay the same after two consecutive years of decreases.
Our southernmost capital city is also one of our best performing property markets. In fact, over 2018 prices here are expected to increase by 4.9 per cent, more than Sydney and only slightly less than Melbourne. Units will also experience price growth, but at a more subdued rate.
When purchasing or selling property, looking at housing trends in your city should only be the beginning. Gain an understanding of your immediate area with the help of a local real estate agent, and you’ll be better informed to buy, sell or rent property in the new year.
NOTE – the above is general information only and does not constitute financial advice.