Finder.com.au are predicting that house values across the nation are expected to tumble by 2021.
What has led to this statement?
Graham Cooke from Finder explained: “It follows on from the question we asked in last month's RBA survey. We ask questions surrounding the RBA's decision of whether or not to increase the cash rate, and recently we've been focusing on property questions because that's what everybody's talking about and because we've seen auction clearance rates dropping and prices dropping.
“Last month we asked them how long they expect the downturn to last, specifically in Melbourne and Sydney, and the average came through at 20 months with ... I think it was about a quarter of the economists actually citing two years or more, so that was a little bit concerning. This month we decided to ask them more specifically about the percentages they expect the prices to drop across the capital cities. Just looking at the percentage drops perhaps unsurprisingly at the top comes Sydney at 8.2%, followed by Melbourne, very closely followed by Melbourne at 8.1%, and then Brisbane at seven. And all the rest are kind of five or less. The very bottom of the list is Hobart, which actually is doing quite well at the moment, at only minus 4.6% for that particular capital.
Is it all doom and gloom for prospective buyers?
Not everyone can afford to sit on their hands for the next couple of years, assuming that the market will come back a little bit to make it more affordable. It's a difficult decision for some people, and sometimes these statements make it difficult for people to make a decision.
Graham said: “It's difficult to really predict what's going to happen in the future. Very few economists in Europe predicted what was going to happen in the GFC pre-GFC, and even as it was happening, even as the prices were falling, very few experts predicted prices to go as low as they did. Some properties lost 30% in value in a short period of time, which had never really been seen before, so it's kind of all to play for.
“But the one thing I would say for buyers at the moment, we don't really know when the market's going to bottom out or whether the prices are going to start going up tomorrow. It does mean that if you're looking to buy at the moment, you should make sure that you're getting good value in the market. There's no need to just jump on the first property that comes up within your budget that ticks all the boxes, which people have been doing previously. Now you can give yourself a little bit more time to make sure that you're getting value for that dollar that you're spending, which would be good in the end for the buyers.”
Are non-capital city regions going to increase in popularity?
Only two out of three buyers in Australia actually choose to live in one of the Cap cities. There is still tremendous buying in some of the regions, even looking around at say Queensland, New South Wales, Victoria, where you can move out of the city, still get a good commute back into the city and spend as much time travelling, but you can get a home that's a lot more affordable. More and more people are going to be moving to the regions.
Graham said: “We also, because of that price differential, have seen an increase in people reinvesting. That's people who do buy those houses in the fringes, but as an investment and continue to rent closer to the city where they can actually live. A lot of the younger investors that I've talked to and seen across the market who have multiple properties have been focusing growing their portfolios in those outlying markets.
“There was a guy I saw talk to a panel in one of the banks in Sydney recently, and he's in his mid-twenties but he has eight or nine properties, I can't remember, but the majority of the properties he has been in places like Newcastle and more outskirt cities. Which is great for his current situation, but it is also an increase in risk, because if the market continues to slide even further it could be those places that experience the biggest drop in prices and indeed drops in rent.”
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