2018: with the housing market crash, the growth of regional property prices, and the overall uncertainty of the global economic climate, it certainly was an unpredictable year for the Australian property market.
Property values dipped almost 5% nationally, with Sydney and Melbourne house prices at their lowest in more than 3 decades - and on top of this, the RBA kept interest rates on hold for the 28th straight month. Meanwhile, Melbourne was ranked the Asia Pacific’s number 1 city for property investment, and the value of regional property grew significantly, with areas like Geelong and Launceston growing far above the national average.
As we move into 2019, the question on everyone’s minds is: where’s the property market going in the New Year?
Here, we look at some of the key property trends Australia is expected to have in 2019.
Market uncertainty: a certainty in 2019
In 2018, the global economy was in a state of uncertainty, and 2019 will be no exception. Ongoing political conflicts in the UK and Europe over Brexit, and Trump’s big spending (and his continued trade disagreements with China), will continue to have a major effect on the world’s markets.
Closer to home, 2019 is an election year in Australia. Labor is currently tipped to win, and if this is the case, we can expect the new government to propose changes to Negative Gearing and Capital Gains Tax incentives. Most experts believe these changes will push property prices lower, but it could also encourage some investors to buy more in the coming two years to grandfather their existing investments.
Finally, while the RBA has kept interest rates flat for 28 straight months - the longest period in Australian history - this may also change in the next year. Most economists and banks believe that while interest rates will remain steady for the first half of next year, we may see a change in the later half of the year or, at the latest, in early 2020.
According to RBA governor Philip Lowe: “If the economy continues to move along the expected path, then at some point it will be appropriate to raise interest rates. This will be in the context of an improving economy and stronger growth in household incomes.”
The state of 2019: property trends in Australia’s capital cities
Property values in the majority of Australia’s capital cities suffered in 2018 due to the housing market crash, after half a decade of growth.
In the New Year, the outlook is a bit more optimistic: according to the recent Property Price Forecast report released by Domain, property prices in the capital cities will fall for the first half of 2019, before turning around to be flat or to even have a modest growth of a few percent.
Here’s a breakdown on the property market by state:
- Melbourne property market forecast: Melbourne’s property prices fell by 5.8% in the past 12 months, but in 2019 it’s likely that the market will recover, with house prices forecast to decrease by 1%, and unit prices forecast to have a modest 1% growth. However, in the long term Melbourne’s property market should bounce back, with good migration patterns to the city, and strong growth in outer suburbs like Coolaroo and Melton South.
- Sydney property market forecast: Sydney’s market suffered the most in 2018, dropping 8.1% over the past 12 months. House prices should stabilise in 2019, while unit prices are expected to increase by 3%, largely due to the NSW government’s stamp duty concessions.
- Brisbane property market forecast: Brisbane’s property market was flat over the past 12 months. As Australia’s national market recovers in 2019, the value of property in the Sunshine State should show signs of recovery, with house prices forecast to increase by 4%, and unit prices by 3%. This is in part due to Brisbane’s growing population, as well as declining unemployment rates.
- Adelaide property market forecast: In the last 12 months, Adelaide’s property market had a modest 1.4% growth, and in 2019 this modest trend is expected to continue. Houses and units are both forecast to grow by 2%, although job growth in the region should help boost the housing market in the long term.
- Perth property market forecast: Perth’s property prices dipped by 4.2% in 2018, but the house market should recover in the next year, with a 5% growth forecast for 2019. The price of units in Perth should remain relatively steady, with an expected 2% growth next year.
- Canberra property market forecast: Canberra was one of only three capital cities that had an increase in property prices in 2018, with an increase of 4% over 12 months. This trend should continue in 2019: house values should grow at the same rate in the next year, and unit values are forecast to grow by 2%.
- Hobart property market forecast: Tasmania was Australia’s strongest market in 2018, with Hobart’s house prices increasing by a massive 9.3% over 12 months. Experts predict that the island state’s housing market will slow down in 2019, with no change in unit prices and a modest 2% growth in houses; however, Tasmania’s other property markets are expected to grow significantly in the coming years.
Ones to watch in 2019: apartments and regional property
Although regional markets were fairly stable in 2018, with a 0.3% growth over the past 12 months, there were a few standout areas which had impressive growth: Geelong had the largest increase in property values outside of the capital cities with almost 10% growth, and NSW’s Shoalhaven and Newcastle regions had 9.2% and 7.1% growth respectively. The median property price in regional areas is the lowest in Australia at $375,488, while the national average is over $535,000.
As the property markets in Australia’s capital cities recover in 2019, many buyers may look to regional areas, thanks to more affordable housing opportunities, as well as more job opportunities, and better amenities, transportation, and infrastructure.
It seems that buyer demand has rippled away from the capitals where growth in home values has been the strongest, towards areas where housing is more affordable, but also jobs, amenity and transport options are also reasonably plentiful,” according to NAB’s housing report earlier this year.
Nationally, unit prices are also expected to do better than house prices in the coming years, with a forecast 2-3% growth in 2019 and 2020. While most capital cities, such as Sydney and Melbourne, will have a big influx of unit developments that will be completed in the coming years and could drive prices down, new stamp duty concessions in Melbourne and Sydney should help balance this out and boost unit property values in the coming two years.
There will be a further and welcome contraction in the supply of new high-rise property in our capital cities, which will extend the outperformance of apartments – particularly older-style units – relative to the broader market from 2018,” says Richard Wakelin in the AFR.
To wrap it up...
With the uncertain global economic context, the upcoming elections, and potential interest rate increases, it’s hard to say for certain where the property market will go in 2019. However, the overall outlook is optimistic: while the first half of 2019 may still be challenging, all signs point to a property market recovery in the later half of the year, with units and regional areas contributing to the growth.
In short, whether you’re buying or selling in 2019, it’s more important than ever to keep an eye on market trends and property news, in order to stay up-to-date with the latest developments that will affect the property market.
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