Recap on 2017 & Looking Forward to 2018 - December 2017

By Rich Harvey, Managing Director propertybuyer

Welcome to our December Newsletter update. This month I asked my key buyers' agents to describe what happened in their patch during 2017 and where the opportunities will be in 2018. There are some interesting themes that emerged.

What do our Buyers' Agents think?

With the end of year fast approaching, myself and my team of Buyers' Agents give their recap for 2017 and what you can expect in 2018.

Rich Harvey, Managing Director and CEO, propertybuyer

"2017 saw some dramatic changes in the market. The first quarter started strongly but we saw the Sydney market cool in the third and fourth quarters while Melbourne is also showing initial signs of cooling - buyers seeming to say enough is enough! In May the Federal budget announced sweeping changes to depreciation laws which impacted investors only allowing depreciation on brand new properties. Existing properties can still claim depreciation, but this will also deter investors trading. Investors are starting to take a breather as lending requirements continue to be tightly controlled by APRA. Low interest rates seem to have run their course and borrowers are now being more cautious sensing there could be a rise next year.

In 2018 I expect the cooling trend to continue. Home buyers will become more of a force as prices may soften a little and flatline after 5 years of boom growth and they sense opportunity. High vendors expectations may take several months to fall into line. Investors will need to look at renovations/ value adding and creative strategies to manufacture equity rather than waiting for long term capital growth. I see more opportunities for home buyers and investors as there is less competition in the property market."

Anna Rorke - Inner West, Eastern Suburbs & CBD Expert

"The Inner West in 2017 had some very strong results with prices in certain pockets continuing to rise. If a property needed major renovations or had an exceptional renovation they seemed to always exceed price expectations. The Eastern suburbs also experienced strong growth particularly close to the city or beaches with lifestyle opportunities with once again renovation potential or standout properties.

Next year I expect the market to moderate. Less desirable properties - i.e. main road locations, poor floor plans and vendors with high expectations, will be the first affected. It may take some time for vendors to meet market expectations in these cases. Properties that are well located and unique or properties with huge potential will continue to do well. Market levels and stock supply will also hold the key to what property prices do, however this remains to be seen as to whether they improve in the new year.”

Jason Low – Manager Client Relations & Strategy

"2017 saw a cooling off in certain markets of Sydney, especially apartments that had no points of differentiation or they had specific inferior attributes such as a poor floor plan, inferior aspects/outlooks, on a main roads etc. It was evident that there were less buyers at open for inspections and those bidding at auction as compared to 2013- 2016. However, this did result in obtaining great properties at a far more reasonable price than in previous years.

Some markets in and around the Ryde, Hunters Hill and Parramatta council’s which had properties with development potential i.e. (Duplex or Townhouse sites) were still achieving record prices and exceeding the reserve price by a substantial margin. I see this trend continuing into 2018 due to the demand of such properties and the shortage of supply.

In 2018 property prices in Australia should rise between 4% to 6%, this will be due to the low interest rates, strong economies and excessive population growth. Brisbane it should be noted will pick up pace in 2018, however there still is an oversupply of inner city apartments for which the investor will need to be wary of.”

Kevin Mason, Nthn NSW & Investment Expert

"In the Newcastle, Lake Macquarie & Hunter Valley Regions we found great buying opportunities for all types of strategies from subdivisions to duplex, dual occupancy & granny flat / secondary dwelling strategies through to renovate for profit / manufacture equity strategies through to unique and well-located investment properties all within affordable price points showing consistent healthy growth & solid yields.

• The new University City Campus “New Space” opened
• The new city light rail path was confirmed & construction underway for the new transport interchange at Wickham
• Funding was approved by the Government for a new cruise ship terminal at Carrington
• A new innovation centre in the CBD was approved
• Natural assets in our city and region helped grab the attention of National Geographic Traveller Magazine in a recent smart cities series, which declared Newcastle as one of the world's top 'smart cities to watch' for meeting the challenges of 21st century urban life and adapting to change.
• Record investment and development occurred

I expect to see continued healthy growth and affordable buying opportunities to be available through the Newcastle, Lake Macquarie, Maitland and Cessnock Regions, however the new strict APRA lending guidelines have placed very tough restrictions around borrowing and this will continue to make it difficult for investors"

Matt Corbett, North Shore & Northern Beaches Expert

"In the past year we have witnessed significant change in the North Shore and Northern Beaches property markets.

The start of the year saw a continuation of the strong rising market of 2016, with low stock levels and high buyer competition, regularly resulting in people over-paying for properties. However, the third quarter saw the market stall as many buyers had given up searching, yet vendors still had high expectations. With more stock coming to market in the fourth quarter, some vendors started to accept that the market had eased, resulting in a market correction in many suburbs, sometimes up to 10%. Whilst this may appear to be a market decline, it was more a reflection of buyers no longer "over-paying" and having a greater choice as many buyers had given up hope and temporarily left the market.

I would expect this trend to continue well into next year, that of a settling market with minimal growth presenting good buying opportunities for the smart investors. Well-located properties with desirable features will continue to be sought after, but those of lesser location and lacking essential features may well see further correction.”

Nick Taylor Fick, Inner NW to Parramatta, Hills District & SW Sydney Expert

"2017 saw strong interest in the Castle Hill / Baulkham Hills areas due to the strong interest flowing from the infrastructure build and the light rail / metro works. The Gladesville to Parramatta region also saw good results due to its location appeal, upcoming transport works and employment hubs.

Good demand in the West was centred around Blacktown / Penrith / Liverpool centres, with the new Airport work making these areas appealing from an investor point. This region has showed signs of slowing more recently and 2018 is expected to continue somewhat.

Generally, 2018, prices are expected to slow / correct and for better buying opportunities to arise. Invests and home buyers seeking more affordable options will continue to drive these areas."

Stewart Fraser – Sutherland Shire & QLD Expert

“I have seen Brisbane suburbs in 20-40km ring (Logan / Deception Bay) showing steady growth over 2017. The only real changes have been to the investor activity (dropping) as a result of APRA requirements.

The agents in Brisbane have also noticed a sharp drop in buyer activity from investors in the last month.

In South Sydney we saw the prices steady and drop slightly for homes in the $1.5-$2M range in the period from July to December. Again, the auction activity declined, and more stock came on the market late in the year instead of Spring. There was a lower auction clearance rate coupled with restricted buyer activity and mainly home buyers out looking.

I feel Brisbane will continue steady growth due to the Commonwealth Games next year plus migration from the southern states as young people search for affordable homes. Depending on the lenders, I see investors looking to Brisbane for better yields and growth potential.

Sydney South will be stable, however there are thousands of new units being built in the Shire and this may lower prices/yields in the next 12 months for units. There are opportunities for owner occupiers in the $1-$1.5M range now prices have dropped off.

Overall the Shire has great opportunities for owner occupiers and investors seeking to take advantage of a cooling market."