How might the Australian property market recover and what should property investors do?

The Australian property market saw prices drop during 2018 and this continued throughout the beginning of 2019…

Throw the recent Federal Election results into the mix and chatter over which direction the cash rate will move next, predicting the impact on the property market, for many, has been no easy task.

According to research in Christopher’s Housing Boom and Bust Report, Sydney and Melbourne saw falls of 7.4% and 4.7% respectively in 2018.

Despite what the media may have you believe, it wasn’t all doom and gloom, with prices rising in other areas.

To pick a few, Hobart experienced strong growth of 9.7% and Canberra increased by 4.3%. Further north, the Gold Coast saw increases of 1-6% across the region, Adelaide increased by 1.8% and Brisbane by 0.4%.

There are individual reasons for changes in each area with local factors influencing prices. Sydney and Melbourne underwent market corrections after years of strong growth. New lending restrictions cut interest-only lending, affecting the investment property market.

But, with all of this in mind, how will the Australian property market recover?

Property price forecasts

Three main factors could affect property prices in Australia for the remainder of 2019:

  1. Cash rate adjustments
  2. Australia’s overall economic performance
  3. AUD fluctuations

Prices are forecast to drop moderately in Sydney and Melbourne in the remainder of 2019.

Both Brisbane and Adelaide are more likely to see prices rises than falls, but the forecast varies between -2% to +5%.

Jobs in Brisbane are increasing and record price differences between Brisbane and Sydney are attracting homeowners and investors alike to Brisbane.

Adelaide has been flat for a decade with price increases of 10% over 10 years and is undervalued compared to income levels. The market favours landlords as vacancy rates have fallen.

Christopher’s research suggests increases of between 1% and 7% for Canberra and 4% and 10% for Hobart. The Gold and Sunshine Coasts are forecast to rise by between 3% and 6%.

Mackay in Queensland is set to see mixed performance but with good potential.

Whether these price increases or falls come to fruition depends on the outcome of a number of external factors.

What about the property market longer term?

BIS Oxford Economics Residential Property Prospects 2018-2021 report predicts further price drops in the first half of 2019, but suggests most capital cities will recover gradually and show mixed price growth until 2021.

Growth in Sydney is likely to average 1% annually and Melbourne 2%. Average annual price increases in Adelaide, Hobart and Canberra may reach 3% and Brisbane could lead the way with 4% growth per annum over three years to 2021.

Options for property investors

Your investment portfolio choices should be linked to your investment timeframe and your tolerance for risk.

History shows, while past performance may not be a reliable indicator of future performance, over time property investments perform well and with net migration are set to increase under most assumptions. According to the Australian Bureau of Statistics, demand for property should increase over the medium to long-term.

For more on investing in the Australian property market, check out how investors can make property gains by playing the long game or consider direct property investment, or investment via a Trust is the right option for your investment portfolio.

The material on this website is intended only to provide a summary and general overview on matters of interest.  Trilogy is only licensed to provide general financial product advice on its own products and does not consider your objectives, financial situation or needs when providing any information or advice. You should consider whether the advice is suitable for you and your personal circumstances and we recommend that you seek personal financial product advice on your objectives, financial situation or needs and obtain and read the relevant product disclosure statement before making any investment decision.