2016 will see strong and wrong markets

2016 will see strong and wrong markets

I’m always amazed when I read property market predictions as the first thing I think is which market are they actually attempting to refer to? Like clockwork each year in January we usually read dire predictions about the economy, property markets and of course the cash rate. It is also worth mentioning that nobody actually comments on the individual markets simply because they don’t understand them so that’s why they then, say, revert to the Sydney markets – a safe bet on being right.

Much like in 2015 when commentators were totally perplexed at Sydney’s out of control residential markets which had them in a state of confusion – until it was pointed out that Sydney has an emerging market called an investment market which was the actual market running amok. The investment market did slow down considerably when the Australian Prudential Regulatory Authority (APRA) intervened and forced lenders to increase the loan lending ratios. Sydney still has tens of thousands more apartments to enter the market in coming years which is very good for the NSW economy.

Now we keep hearing that Sydney and Melbourne are facing significant oversupply. Is over supply a bad thing? We haven’t seen oversupply for residential properties in our markets since the Global Financial Crisis so a re-calibration of the markets should be seen as a good thing. This will only occur in the investment markets and highly unlikely that we will see this in the residential home markets because we are now witnessing firsthand less properties being offered for sale. When you do see an oversupply this then sees the properties enter the rental markets which should lead to vacancy rates increasing and weekly rentals reducing.

Australia_Day

SYDNEY AERIAL PHOTOGRAPHY

Of course the wrong markets are the brand new markets where individual suburbs have experienced massive new high density developments. Probably what will save these markets is that the cash rate won’t be going up anytime soon. Some are now predicting that the cash rate won’t change at all in 2016 and will be reduced further in 2017.

The steroid assisted property markets which posted unprecedented capital growth in recent years could start correcting in 2016 although this still remains a wait and see market as much of the buying was done by foreign buyers – so nobody actually knows. What we do know now is that our property markets have become well and truly international with very strong overseas enquiries. With the Australian dollar expected to fall further in 2016 one can expect to see overseas buyers playing a more dominant role. The only thing that would change this is for the federal Government to reduce the off – the – plan purchase ratio which presently allows 100 per cent.

Don’t expect that to happen in an election year as such an announcement could very well result in negative publicity and we are all well aware that politicians hate that. In the meantime the Federal Government is busily preparing its taxation white paper and we all know that this time around they are looking at an increase in the GST. I wouldn’t be concerned about the increase as I can’t see that happening either simply because the states and territories won’t agree to surrender their ‘rivers of gold’ in the form of payroll taxes, stamp duties and land taxes. They are too smart for that. They know that even with an increase in the GST they are worse off when they surrender their taxes – which explains why they have never been removed.

In the meantime the question that really needs to be asked is who then is actually in charge of the Australian economy? Businesses and institutions keep paying accountancy firms to report on what is required to get the Australian economy going again with the same answers coming back every time – remove the State and Territory taxes.

But let’s not forget the Henry Tax Review which was commissioned by the Rudd Government in 2008 and published in 2010. The review was intended to guide tax system reforms over the next 10 to 20 years – this ended up in the political too hard bin much to the resounding pleasure of the state and territory governments.

So what about the 2016 property markets? Same, same with a few interesting moments happening in the investment market sales in particular with purchaser defaults. In the September quarter last year private sector residential building works hit a staggering new record of $13,622 million, although it needs to be pointed out that this is all for brand new apartments not houses. We are not seeing new housing which explains why the house market remains so strong to the extent that we if anything expect prices to climb further in 2016 simply because of the demand.

Just like every other year we expect the markets to start their annual easing around November where when this happens those pesky commentators keep writing that we are in the midst of a massive price correction.

We are just a few week’s from seeing if they are right although I expect we will see clearance rates back to north of 75 per cent again very shortly.

MOSMAN – 2088

• Number of houses on the market this time last year – 48

• Number of houses on the market last week – 35

• Number of houses on the market this week – 36

• Number of apartments on the market this time last year – 44

• Number of apartments on the market last week – 30

• Number of apartments on the market this week – 32

CREMORNE – 2090

• Number of houses on the market this time last year – 6

• Number of houses on the market last week – 8

• Number of houses on the market this week – 9

• Number of apartments on the market this time last year – 14

• Number of apartments on the market last week – 10

• Number of apartments on the market this week – 11

NEUTRAL BAY – 2089

• Number of houses on the market this time last year – 6

• Number of houses on the market last week – 6

•Number of houses on the market this week – 6

• Number of apartments on the market this time last year– 35

• Number of apartments on the market last week – 21

*Number of apartments on the market this week – 23

For this week’s sales in Cremorne real estate, Cremorne Point real estate, Mosman real estate, Beauty Point real estate, Clifton Gardens real estate, Balmoral real estate, Neutral Bay real estate, Cammeray real estate.

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For this week’s open for inspections

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Source: APM Price Finder

3 Responses to “2016 will see strong and wrong markets”

  • Ann says:

    Happy New Year Robert. Yes there are too many elections, can’t see rates going up anytime soon, if at all in 2016. Agree with your tax assessment.

  • Ryan O'Grady says:

    Robert, so good to have you back on deck writing VRN. I hope your summer and vacation has been good!!

    Your insights about the market are very refreshing to hear. Keep up the good work!

  • peter maccormick says:

    welcome back nice to read some honest reporting !! happy australia day

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