Sunny with a light shower clearing in the afternoon!
2017 saw a continuation of the steep growth in property values that we have watched for the past five years.
Melbourne had 57% growth in dwelling values over five years and a 12.1% increase since September 2016!
So what can we expect from the 2018 property forecast?
2018 should follow a similar pattern to this year. However, banks have and are continuing to tighten their lending criteria which affects both the home buyer and investor. The outcome of which is likely to be a flattening of the market.
With a slight flattening of prices, the new Vacant Residential Property Tax and stamp duty concessions, particularly in Victoria, we’re likely to see an increase in first home buyers.
What’s the new Vacant Residential Property Tax?
As the lack of supply drives up prices, renters and first home buyers are becoming frustrated at the number of properties being left empty. Many of these properties are being held by investors, leaving them vacant and accumulating capital gains.
The Vacant Residential Property Tax will provide an incentive to reduce the high number of houses and apartments being left vacant in the inner and middle ring of Melbourne.
It will mean increased housing supply and less pressure on house and rental prices, by encouraging landlords to offer their vacant properties for rent or sale.
The new Vacant Residential Property Tax will be levied on dwellings that are vacant for more than a total of 6 months in a calendar year.
This measure will tilt the scales away from investors and toward first home buyers.
The tax will be triggered on 1 January 2018.
Whilst interest rates remain at record lows, the chance of the property market suffering is unlikely unless there is some significant overseas event that impacts Australia. Keep in mind though, this is what most experts said before the Global Financial Crisis.
Issues that will continue to plague property buyers, but sustain prices in 2018 is of course, as mentioned, low interest rates. The continued shortage of homes for sale together with the increased pace of the influx of people settling in Victoria, Melbourne in particular, will continue to force upward pressure on prices albeit probably not at the same rate as 2017.
As the stamp duty due on a median-priced house in Melbourne hovers about $50,000, homeowners will increasingly opt to stay in their current home and renovate, rather than buy to upgrade. This contributes to a shortage of supply as recent Westpac research shows a 14% rise in the number of homeowners considering renovating in the next five years, compared with 2015, while HIA economists predict a strong growth in the renovations market through into the early 2020s.
In June 2020, the median house price in Melbourne is forecast to be $940,000, a cumulative 10% increase over the three-year forecast period.
At this stage, there doesn’t appear to be any storm clouds on the horizon, perhaps just a light shower clearing in the afternoon. But as we know in Melbourne, the weather can change quickly, so it always pays to be prepared with an umbrella and raincoat. Of course, the best prepared will have full wet weather gear in the wardrobe just in case!
If you’re planning on buying or selling your home in the new year, take a look at our 6 Must Reads Before Buying or Selling.
