Property investors warned on 2017 decline
While the residential property market is unlikely to weaken in 2016, property price declines could be on the horizon in 2017, with the market now responding to APRA’s regulatory guidelines, according to one property research company.
Speaking at a Sydney event, BIS Shrapnel managing director Robert Mellor said evidence is surfacing to suggest that investors and lenders involved in the property market – particularly in Sydney – are beginning to respond to APRA's directions regarding loan interest rates and loan to value ratios.
Mr Mellor said it will be “interesting” to see how investors buying off the plan will respond when property price growth begins to edge back toward two or three per cent.
“Will they buy off the plan? Will they be paying inflated prices – because there will be inflated prices for off the plan [compared] to established property,” he said.
“At that point, you could get a bigger correction in the market simply because investors leave the market for new property.”
Investors looking at properties going for $1 million to $1.4 million in the middle-distance suburbs may think they are seeing unaffordable prices, Mr Mellor said.
“If there’s not a correction, we’re in for a period of fairly modest price growth over the next five years,” he said.
Finding areas in Australia with huge growth potential is difficult, he said, but noted it may be worth investors looking at places such as suburban Brisbane.
The suburbs that lie around 10 kilometres from the city offer the greatest value, rather than inner city areas such as the CBD, Mr Mellor said.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.