Australian property market: 2016 predictions

A new year usually comes with updated property market predictions. So what’s coming in 2016? First, according to many forecasters, the Reserve Bank is tipped to leave interest rates on hold for most of 2016. However, the forecasts are quite varied as to the amount of change, with some predicting a 1.5 to 2 per cent cut and others expected a 2.35 per cent increase.

Individual cities

Predictions relating to the property market differ from city to city.

• Sydney: Prices in the inner city will continue to perform well. However there is a possibility that property prices in the outer suburbs will fall. The combination of this means a slight growth of 3-4 per cent. This is supported by a recent ANZ report, forecasting a 3 per cent price rise for NSW. According to the report, “there will be little respite for those seeking to enter the market for the first time as deposit affordability will remain difficult.” SQM research predicts a 4-9 per cent growth in Sydney.
• Melbourne: Oversupply in inner city apartments means that the market will probably perform quite poorly. In contrast, the outer suburbs of Melbourne are likely to perform well in 2016. Because Melbourne didn’t have such a big boom in 2015, there is more room for prices to rise, most likely at a 5-6 per cent growth rate. ANZ’s prediction is a little more moderate, sitting at 3.2 per cent, while SQM forecasts an 8-13 per cent growth.
• Brisbane: Queensland’s capital is tipped to see an overall 8-9 per cent growth in 2016, meaning it’s a good investment option. The 2 per cent rise projected by the ANZ report is much more conservative. According to SQM research, Brisbane is tipped to see a 5-8 per cent rise.
• Perth: Perth continues to struggle due to the fading mining boom and a falling population. While it’s a delightful city with employment opportunities, minimal growth - if any at all - is predicted, sitting at -2-1%. This is backed by SQM research, which forecasts a drop of 4-7 per cent for Perth. Despite this, the ANZ report is predicting a 2 per cent recovery for the Western Australian market.

According to the ANZ report, Australia as a whole will see a 2.8 per cent increase. Further, capital city dwelling prices are predicted to rise between three and eight per cent on average, much lower than the 9.8 per cent in the past 12 months. Louis Christopher from SQM Research believes the deceleration of the market is largely due to Sydney’s market. “We forecast the national residential housing market will slow in 2016 predominantly as a result of a slowing Sydney housing market; however, we do not believe the market will record a fall in prices for the year.” He also believes the slower economy and restrictions on investor lending, implemented by the Australian Prudential Regulation Authority, will add to the softening market.

What do the experts have to say? 

There are plenty of experts on the Australian property market who have predictions to share regarding 2016.

• John Symond, Aussie Home Loans “The eastern seaboard has had a big year in terms of housing values … The other states have been very patchy, Western Australia, especially Perth, has been doing it tough … The steam is coming out and the market in Sydney and Melbourne will revert to a more healthy real estate market and I think that is really important. The best places to buy in 2016 will be inner-city suburbs of capital cities, close to transport hubs, workplaces and amenities.’’
• Brian White, Ray White White believes Sydney will lead the way for growth again in 2016, however it will be at a more subdued rate than previous years. He predicts the following:
  • Sydney – 5 per cent growth
  • Melbourne – 4 per cent growth
  • Brisbane – 2 per cent growth
  • Adelaide – 1 per cent growth
  • Perth – remain flat.
• Grant Harrod, LJ Hooker Harrod predicts the Gold Coast will show the most potential for 2016, mainly due to housing affordability, the falling Australian dollar and the Commonwealth Games. He also believes the Sydney, Brisbane and Melbourne markets will flatten out, while the Gold Coast market sees a 5-10 per cent growth, and Hobart, Adelaide, Darwin and Perth see a 2-3 per cent fall.
• Charles Tarbey, Century 21 Australia “I think Brisbane is poised for a nice steady growth. People in Sydney and Melbourne have gained a significant amount of equity in their properties, they are going to look to invest and they are not going to invest in Perth because it is still moving sideways, slightly downward and sideways.”
• John McGrath, McGrath Real Estate McGrath believes regional New South Wales and southeast Queensland will be the major growth areas for 2016. “Both have missed most of the price growth that Sydney and Melbourne enjoyed over the past few years and are therefore presenting very good value. I suspect both investors and sea changers will be eyeing off these markets.”

If you have any questions about 2016's market trends, or are looking to buy or sell, please feel free to contact us today.