Home buyers will need to look at renovations and value adding strategies to manufacture equity rather than wait for long-term capital growth as prices soften and flatline in several key Australian property markets in 2018, warns Australia’s largest professional body of buyer’s agents.
Property markets in Hobart and Brisbane are anticipated to remain buoyant into next year with keen interest from interstate buyers priced out of the Sydney and Melbourne markets.
Real Estate Buyers Agents Association of Australia (REBAA) president Rich Harvey said there would be more opportunities for home buyers and investors in several capital city markets in the New Year with less competition in the property market.
“2017 saw some dramatic changes in the market,” said Mr Harvey.
“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.
“Tasmania and Brisbane seem to have bucked the trend with price growth anticipated to continue well into 2018.”
According to Mr Harvey growing pressure on investment lending combined with tougher lending criteria, will see buying property much harder for investors than it was this time last year.
“In May the Federal budget announced sweeping changes to depreciation laws which impacted investors only allowing depreciation on brand new properties,” he said.
“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 the Australian Prudential Regulation Authority.
“Low interest rates seem to have run their course and borrowers are now being more cautious sensing there could be a rise next year.
“Our advice is to be proactive, diligent and negotiate hard.
“Buyers need to ensure they understand the local growth drivers of supply and demand and that they are in the right price pocket for that particular location.
“A buyer’s agent can help analyse the data quickly using the best valuation tools available and guide buyers through the property maze with minimum stress.”
REBAA’s state representative give their pick on where to buy in 2018:
REBAA NSW representative and buyer’s agent with Hunter James, Sebastian James:
Investors: Investors should look to property and areas where growth can be manufactured and does not rely on generic macro factors. Above average rental yields and affordability will increasingly become key drivers once again, as will the demographic shift towards mid density property close to amenities and transport and particularly in areas with new infrastructure and touted for gentrification.
Home buyers: The highest risk will be in areas of oversupply and particularly in high density new developments where buyers are often victims of marketing misdirection, such as a focus on tax depreciation benefits or a reliance on past performance as an indicator of future performance. In this segment many inexperienced buyers will end up paying a considerable premium for the benefit of owning brand new to facilitate the developers’ profit margins, even though this will undoubtedly be the softest dwelling category as far as short-term capital appreciation is concerned. This is exacerbated by increases in stamp duty for foreign buyers, reducing their appetite in a segment where they have often been relied upon to absorb a lot of new supply.
REBAA ACT state representative and buyer’s agent with Capital Buyers Agency, Claire Corby:
Investors: The Canberra unit market has started its recovery with established and near-new apartments in the blue-chip inner south offering attractive yields at current prices. Townhouses around the lifestyle precinct of Braddon and close to the Australian National University are consistently popular, with Haig Park improvements and the completion of the light rail project along Northbourne Ave set to further increase demand across the inner north. Be wary of oversupply when considering apartments further than 8km from CBD, particularly off-the-plan.
Home buyers: The $600-$800k segment is highly competitive; for affordability without compromising on proximity to the CBD, consider Weston Creek. With the new Molonglo town centre emerging to the West, it offers bigger blocks and better value for money for buyers who are happy to renovate. The local shopping centre is undergoing an update and popular public schools make the suburbs of Duffy and Chapman in particular great targets for families looking to benefit from an area undergoing change. First home buyers will do well to consider the NSW grant by shopping over the border in Queanbeyan where prices are yet to surge. At the premium end, record auction prices continue in an increasing number of suburbs. Homes close to Canberra Grammar School and Manuka are highly sought after with a growing number of interstate and international buyers competing for these as long-term investment/home hybrids.
REBAA VIC state representative and buyer’s agent with Buyer’s Advocate Australia, Leigh McConnon:
Investors: Single level villas will continue to outperform most other property types given the demand from first home buyers, small families and investors and particularly the downsizer market. For a budget around $800k-$1million, the best areas to consider are blue chip locations with the eastern and bayside suburbs within the 15km radius of the CBD, provided the property is within 1km of a train station or tram line. For $500k-$800k, the northern suburbs of Pascoe Vale, Hadfield, Glenroy and Reservoir still offer excellent value.
Home buyers: There are very few opportunities for under $600k-$700k for those wanting house and land close to transport within the 20km radius of the CBD. For those that are happy to go out a bit further they should consider areas that are well serviced by shops/cafes and transport (train). An example is Diamond Creek, which is an area that is likely to outperform the market as it still offers affordable housing and has undergone a significant gentrification process.
REBAA QLD representative and buyer’s agent with Hot Property Buyers Agency, Zoran Solano:
Investors: Brisbane’s top end market will start to move with interstate migration bringing more families from Sydney and Melbourne. Investors should look to capitalise on this with the premium rental market staying buoyant going into 2018 within the $800-$1,500 per week range renting quickly. Developers have shifted their focus from inner city off-the-plan apartments to house and land and townhouse projects which are earmarked to be the next oversupply.
Home buyers: Home buyers be warned. Blue chip Brisbane suburbs within a 10km radius of the city will see a two-speed economy – locals vs interstate buyers pushing up prices in these areas. First home buyers should consider the renovator as opposed to moving further away from the CBD for the newer home.
REBAA TAS state representative and buyer’s agent with My Property Hunter, Rob Zubin:
Investors: For investors looking for high growth, the inner city suburbs around North Hobart, South Hobart and New Town will provide strong potential for growth in the coming 18-24 months if buying up to the $600,000 range. Some of these suburbs have experienced 20 per cent growth in the past year alone. For more of a balance between growth and return within a 15km of the CBD, investors could be looking at around $450,000 and expect yield of around 5 per cent. Rental vacancy rates at the moment are less than 1 per cent. Suburbs include Moonah, Lutana, Montrose, Howrah, Lindisfarne and Geilston Bay.
Home buyers: Home buyers have the potential to secure inner city blue chip suburb property within a 30-minute walk of the Hobart CBD from anywhere between $600,000-$1.5 million. Demand is outstripping supply. Strong competition for all property types is impacting on both strong price growth and reduced time on the market.
REBAA SA state representative and buyer’s agent with Logica Property, Paul Siwek:
Investors: The market continues to be fragmented with some areas experiencing more than 10 per cent capital growth, while many others less than half of that. The eastern suburbs (inner east and south) continue to be a good choice for investors looking for the long-term capital growth. Quality two-bedroom units are a good entry level there with prices around early to mid $400s and the rental yield of about mid 4 per cent. For a budget of about $550-700k, middle-ring suburbs between the CBD and the coast (particularly south-western areas) offer an opportunity to buy a quality freestanding house providing a good balance between capital growth and the rental yield. Off-the-plan developments should generally be avoided.
Home Buyers: Many of the better and popular inner and middle-ring suburbs experience a relative lack of stock, increasing the competition from other buyers and pushing the prices up. Once a suitable property is identified, buyers need to act quickly. In the eastern suburbs, an additional difficulty for home buyers is that most of homes are sold by auction without price guides. Many buyers end up chasing properties which are going to sell outside their budget. Others, inexperienced with auctions and values end up paying too much. This is particularly true for properties located in some popular school zones, like the Glenunga International High School or Brighton Secondary School. To move into those areas and still keep the budget in check, buyers should consider buying a property with a smaller block of land