Australian Residential Market 2016, Possibilities !

We have had some followers of this website reply back to us requesting further information to the post, Bubble in the Australian Residential Market, we would like to remind everyone and we emphasis that post was our interpretation of a real estate cycle so that we could achieve a better understanding of the word Bubble, and who utilises this term and how it can be manipulative. The information that has been provided below will assist in the better understanding of how new markets are created.

Once again we would like to remind all parties that any information posted on this website is not to be taken as professional advise, as all parties circumstances will differ as none are the same and different laws apply to other States and Territories. We advise all parties to seek professional advise and assistance when dealing with these matters.

It is always best to discuss these matters with your Accountant/Financial Advisor and Solicitor before proceeding any further.

The Australian Residential Market for 2016, we are nearly there and we are already witnessing changes in the market, buyers behaviours are frustrated and there is good reasoning for this.

It is fair say that the market has been warming up since early 2014 and reaching boiling point mid to late 2015. Having said that how do we know the direction of the market for the immediate future. We know for a fact that the market in general is very concerned about the current trend, so what has happened of late. The Australian Prudential Regulation Authority ( APRA ) oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurance, friendly societies and most members of the superannuation industry. APRA is funded largely by the industries that it supervises. It was established on 1 July 1998. This governing body has recently been active in the manner how lenders determine their business dealings and of late lending bodies have increased their fees and lowered lending ratios, while the Reserve Bank of Australia have sat still.

Click graph to enlarge view

We are also aware that the Australian Federal Government have amended the laws on how foreign investors purchase real estate in Australia.

A report from CoreLogic RP Data indicated The Australian Bureau of Statistics (ABS) released housing finance data for October 2015 earlier this week.  The data showed an ongoing decline in investor housing finance commitments as owner occupier demand rebounded.  As we’ve commented before, the data is being influenced by many Authorised deposit-taking institutions (ADIs) reclassifying investor mortgages as owner occupier mortgages.  This is muddying the results to some extent nevertheless, we are also seeing tighter lending criteria for investors as well as higher mortgage interest rates which is clearly also having an impact on demand and causing it to slow, graphs below have been provided by the ABS.

Chart 1

Chart 2

Chart 3

Chart 4

Leading authorities are expecting the market to soften over the coming months into 2016, as investors slowly decline from the market and owner occupiers enter the market, it is reasonable to assume the Australian Residential Market will have a soft landing.

The double digit capital gains enjoyed over the past year or so are about to decline as we all new this was not sustainable. However the hot spots that have been enjoying the high gains may still be leading the way at mid single digit of growth.

So if we are to predict the Australian Residential Market taking into consideration the current World climate, a softening in 2016 to a possible decline in 2017.

This is now the manifestation of entering into a new market.

 

Regards

George Serghis

Property Consultant

 

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