2016 outlook

Corelogic, a specialist property information service has provided this brief outlook for 2016

As we move into 2016, it is clear that the strong housing market conditions of 2015 have softened over the final months of the year, setting the scene for more sedate conditions in the New Year. Interest rates are likely to remain at their current historically low setting, which will continue to stimulate housing demand, however migration rates are continuing to taper which will offset some of this housing demand, particularly in the mining regions, which were previously benefitting from strong rates of migration from both overseas and interstate. Clearance rates in Sydney and Melbourne slipped from the high 80% mark around the middle of last year to the low 60% range in December. Listing numbers are rising, homes are taking longer to sell and value growth has slowed sharply in Sydney and Melbourne, which were the primary drivers of growth over the recent growth cycle. Throughout 2016 we may see further moderate value declines in Sydney and Melbourne, however considering population growth has remained strong in these areas and economic conditions are very healthy in these cities, we would be surprised if dwelling values fell materially before conditions start to level. The city that is showing the most promise for capital gains in 2016 is Brisbane, or for that matter, the broader South East Queensland region. Yields are much higher compared with Sydney and Melbourne, the rate of capital gain has been moderate but sustainable to date, and affordability is far superior to the two larger cities as well. Interstate migration remains positive into Queensland and may start to improve with the higher rate of job creation over the past year. The Canberra housing market has also been showing tentative signs of growing values along with Hobart however, market conditions have been more volatile from month to month in these areas. The regions that are likely to underperform are those associated with a higher degree of economic uncertainty. The Darwin and Perth housing markets peaked in late 2014 and both home values and rental rates have fallen over the past year. The rate of decline may start to ease in these cities; however growth prospects are likely to be at least a year away in these markets. The Adelaide housing market has remained relatively steady over the year, with values virtually unchanged in 2015. However, as the automobile manufacturing sector continues to wind down in the region, coupled with the soft resources sector, the economic outlook for the city isn’t likely to have a positive influence on housing market conditions in the area. Along with the many other economic variables and factors, the changing regulatory environment is yet another factor likely to influence the market in 2016, particularly proposals released just prior to Christmas by the Basel Committee to levy higher capital on investment loans.

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2016 outlook