In 2013, the housing market in Australia started handing out the presents early – low interest rates and some long-awaited growth in property prices. No doubt this festive season, more than a few Christmas wishes will be directed at hoping that the property market will continue to be an absolute cracker in 2014. So, will the market continue to be naughty or nice in 2014? More importantly, what does this mean for you? Should you buy or sell? Build or paint? Wait patiently or go for broke? Well, as with most things, the property trends for 2014 are a little bit of everything – but it seems that, this time, there may be a little bit of cheer for everyone.
The latest RP data (released on 18 December) shows that to the end of November, 2013, Australia’s combined capital city home values increased by 8.3 per cent.
Real Estate Institute of Australia (REIA) president, Peter Bushby, says that a housing recovery is here – and it’s no bubble: “Overall, the housing market was relatively weak in 2011 and 2012 and we were glad that in 2013 the market turned the corner. Unfortunately, some commented that these early pick-ups on some markets were a sign of a bubble. We do not see any bubble.”
But while growth is up Australia-wide, it’s not being experienced everywhere.
Chief economist Harley Dale, from the Housing Institute of Australia (HIA), makes it plain that we’re looking at many property markets, all running at different speeds. “We have a tendency to talk about the Australian housing market as if it’s this one nicely grouped together market. In reality, there are thousands of housing markets in Australia – all doing different things at the same time.”
Mr Bushby agrees, noting that “the increased market activity has been patchy around the country – Tasmania in particular and to some degree South Australia are not as strong, Queensland is emerging and WA is still quite strong although flattening.”
So where will the growth be in 2014?
Mr Dale wants us to look for the sleepers, saying that “previously underperforming markets – Brisbane, Gold Coast, Sunshine Coast – those markets are bottoming out. Property there is cheaper than it was three, four, five years ago”.
Cameron Kusher, research analyst for RP Data, agrees: “The Brisbane housing market has recorded value growth of just 3.1 per cent throughout 2013 and may be best placed to capitalise on the looming affordability constraints and easing investment demand in Sydney, Melbourne and Perth.”
There may be some good growth in the regions too.
Dennis Bice, executive retail at Bendigo Bank, has identified a few climbers, citing strong growth in Newcastle, Wollongong, Geelong, Bendigo, South Australia’s Riverland, Port Lincoln and Mandurah in WA.
Mr Dale has also identified a regional winner: “One area of NSW which has been an underperformer has been the mid-north coast. That market looks to be bottoming out and will show some life again in 2014”.
Will the growth stick around? Overall, things are looking positive for future growth, even if it is a little slower than it was in 2013.
Based on the Property Council’s quarterly Industry Confidence Survey, Caryn Kakas, executive director of the Residential Development Council, is expecting “strong growth in the across the property industry over the next 12 months.”
The only fly in the ointment might be changes in how people feel about their job security. Official forecasts are that unemployment will peak at 6.25 per cent per cent next year – its highest level since September 2002.
Kusher warns that, “if people start to become nervous about their job security, it is likely to result in a lower level of demand for housing and in-turn impact on capital growth”.
Bushby agrees: “Unemployment and underemployment concerns outweigh the attractiveness of cheaper loans with many first home buyers being worried that will not be able to afford repayments.”
So, what does this all mean for you?
Well, the game is definitely afoot. The best advice is to spend the holiday break doing your homework. With that in mind, here are some things to think about:
- Avoid getting swept up in property market hysteria. It is easy to rush to act because it seems like you’re going to miss the boat on low interest rates and low prices. The truth is, if you have to borrow 95 per cent of the price of home, you’ll have to pay additional insurance on your loan and that could negate the benefit of a lower interest rate or a red-hot property price. It may make more sense to save up, even if it means that prices or rates might increase a little in the meantime.
- If you are in a position to buy, look for places that have experienced low growth over the past few years but are showing signs of movement, high demand, increased services or population growth.
- If you are thinking about major renovations, the next six to 12 months could be a good time. Harley Dale from the HIA says that the industry has just been through a slow patch for construction, so availability of skilled tradespeople is good and pressure on trade rates is low.
- If you’re thinking about investing, there are some areas with very high demand for new housing stock. Sydney, rural NSW, South East Queensland and Greater Adelaide all need new homes, according to the Housing Institute of Australia. Consider avoiding locations with higher vacancy rates (Canberra currently has the highest vacancy rates of all of the capitals, at 4.5 per cent).
- There is a wealth of information online about growth rates and sale prices, right down to suburb level. Read, think, talk, get advice. If you’re well-informed, you’ll be in a better bargaining position for dealing with agents, advisers and tradespeople – and more likely to be decking your own halls next Christmas.