When it comes to Australian property markets, over the past few years it’s typically been a tale of two cities. More than all other capitals, Sydney and Melbourne have both seen significant growth in the value of their real estate, which many are predicting to slow as we move into 2017.
“Most sources, including the Australian Bureau of Statistics, show that the rate of price growth in Sydney and Melbourne has slowed,” says Terry Ryder, founder and director of hotspotting.com.au.
“That’s what I expect to happen in response to the fall off in the number of sales, which has been quite sharp. This is also to be expected after three very active years.”
Angie Zigomanis, senior manager of residential property at BIS Shrapnel, agrees.
“2017 is probably going to be more of the same. Sydney and Melbourne have had a pick-up in demand and we expect to see further price growth come through over the year, but nothing like the big double-digit stuff we’ve been seeing until recently,” he says.
So what specifically is on the cards for Sydney, Melbourne and the other major capitals?
Although price growth may be starting to slow in Sydney, the rate of growth remains healthy in many parts of the city. Ryder sees the construction of the Western Sydney Airport at Badgerys Creek, which was given the final green light by the federal government late in the year, as a possible point of stimulation in the years ahead.
“For future growth you have to follow the infrastructure trail; Badgerys Creek airport would be the epicentre of this in western Sydney,” he argues. “Not just the airport itself, but all the stuff that's going to spring up around it.
“Suburbs like Blacktown, Liverpool and Penrith are the markets that are still showing a little bit of growth, so those are the ones to focus on because that’s where the infrastructure will happen.”
Meanwhile, Sydney's increasing population and suburban sprawl is having an impact on the satellite cities of Newcastle and Wollongong, according to Zigomanis.
“Wollongong is probably a bit stronger than Newcastle because it’s close enough for many Sydney-based workers to commute from. But Newcastle is also showing positive signs.”
According to CoreLogic median figures, central Newcastle apartments went up in value by more than 12% over 2016, while house prices in central Wollongong went up by more than 14%.
Like Sydney, growth is occurring both within and outside of the greater Melbourne basin. Ryder sees some big opportunities as coming outside of the inner city.
“In Melbourne it’s very much about areas on the periphery of the city now. The affordable areas that are still showing growth are places like the Casey municipality in the far south-east and the Epping precinct up in the far north,” he says.
“Geelong is probably the strongest market now, stronger than any market in Melbourne. Looking forward it could be considered an affordable alternative to central Melbourne.”
House prices in Geelong West increased by more than 10% over 2016, according to CoreLogic, while apartments in Central Geelong saw value growth of around 7%.
2016 may not have been quite as good a year as some had anticipated in Brisbane. But there are still areas of the Queensland capital showing significant potential.
“In Brisbane’s far north, the Moreton Bay area has a number of growth markets that are very affordable with good infrastructure and job growth. So that market is coming along strongly,” says Ryder.
The population of the Moreton Bay region is set to grow significantly over the next 15 years, according to the Queensland government.
Brisbane's satellite areas are also seeing some success.
“The Gold Coast and Sunshine Coast are benefitting from increased tourism and a lot of infrastructure spending that's taking place,” says Zigomanis.
The Sunshine Coast University Hospital development, Bruce Highway upgrade and expansion of the airport are a couple of the big projects driving change in the Sunshine Coast. Apartment prices went up by more than 20% in Noosa Heads over 2016 by CoreLogic median numbers, while Noosaville houses were up around 13.5%.
Decreased mining investment continues to impact the property market in Perth, with Zigomanis predicting the downturn in the WA capital “probably still has another one or two years to run.
“Our estimates are that activity and employment will decline until 2018, so the mining sector will continue to be a drag on the economy next year and probably the following year,” he says.
According to Ryder, such conditions may prove attractive in 2017 for savvy and patient investors.
“There are opportunities in Perth. The prices have dropped a lot and people with a bit of vision to the future could take advantage of that,” he says.
“Perth will recover in time and show price growth. It has a very good long-term track record that people taking a long-term view could exploit.”
Results and opinions are mixed for the city of churches. Although its overall property market performed decently, if not spectacularly, in 2016, there could be some negative effects from changes to the local economy in the year ahead, particularly the shutdown of Holden’s automotive manufacturing.
“Adelaide still has challenges going forward. It’s got a big manufacturing base and a lot of industries that have been under pressure from the higher Australian dollar in recent years,” says Zigomanis.
“The lower dollar this year has given the market some breathing space, but other the next 12 months the shutdown will have a big impact, particularly around the northern suburbs where a lot of that automotive-related work is based.”
Ryder, on the other hand, is a little more upbeat about Adelaide and sees some areas of positivity across the city.
“Adelaide’s got some good sales activity, it’s affordable and has some quite good infrastructure from the state government. It offers very good value for money and better rental yields than you’ll get in Sydney or Melbourne,” he says.
"One municipality to watch out for is the middle-market Charles Sturt Local Government Area, which includes bayside suburbs like Henley Beach and West Beach.”
2016 was a good year for Henley Beach, where median house prices increased by around 19% and unit prices by around 15% according to CoreLogic.
For many, Hobart was the surprise package of 2016, with capital growth of 8.5% in the 12 months to 30 November according to CoreLogic – the best-performing capital outside of Sydney and Melbourne. As a result of increased tourism and population growth, and a weaker dollar helping some parts of the agricultural sector, both Ryder and Zigomanis expect this trend to continue next year.
“There are growth markets right across Hobart. The more affordable are the Glenorchy precinct and north of the city CBD,” says Ryder.
“There are lots of affordable housing options there with good rental returns. For most investors who can’t afford to buy in Sydney or Melbourne it’s very attractive to buy there right now.”
CoreLogic reports Hobart offers the highest gross rental yields of all the capitals for both houses and units.