As many of our regular readers will know, forecasting future trends in the property market is rarely an accurate science, particularly when we remember that real estate activity is driven by such a wide range of influences. Indeed, as we mentioned in last month’s Market Update, you only have to look back at the predictions of most market commentators this time last year to see that any forecast can quickly become redundant when circumstances change.
However, there are some factors that we can be reasonably confident will have an impact on the Victorian market in 2018, so I thought this might be a good time to consider these, particularly for those readers who may be utilising the holiday period to make plans for the coming year.
Not surprisingly, one market driver that many home owners focus on is a change in interest rates. There seems to be a consensus among many economic forecasters that if we do see official interest rates increasing in 2018, (and that is a big IF for some commentators), it will be in the latter half of the year. But keep in mind that rates in the USA are expected rise before this, and with many Banks sourcing their funds from overseas, we may see some slight upward movements on our home loans without any input from the Reserve Bank.
Another question that many home owners are asking about is what property prices will do this year, particularly after several years of remarkable growth. Whilst some commentators have been keen to talk down the market with forecasts of a levelling out of prices, or even a drop in some cases, I think that these predictions are missing the point.
Melbourne has the fastest rate of population growth in the country, and this is expected to continue. With housing construction struggling to keep up with demand, consumer confidence remaining high, unemployment rates declining, interest rates at record lows and buyer demand continuing to exceed the supply of available property for sale, anyone with the most basic understanding of economics can see that it is hard to see prices falling in the foreseeable future. Yes, affordability issues may well see the rate of price growth continuing to slow, as it did in the second half of 2017…but that is a very different situation to a drop in prices.
One trend that I do expect to see continue in 2018, particularly during the first half of the year, is the increased buyer demand in what were once considered some of Melbourne’s more affordable suburbs. Areas like Frankston North, Cranbourne, Sunshine and Epping all experienced strong price growth last year, and the signs are that buyer demand will continue to push prices upward at this end of the market for some time yet.
From our perspective here at Ian Reid Vendor Advocates, as long as stock levels remain at their current low levels, the ongoing competition between buyers seems likely to keep pressure on property prices. Until we see stock levels returning to more normal levels, particularly if this is accompanied by an increase in official interest rates, the news on the property market looks likely to remain positive for sellers, and tough for buyers.
Of course, if you would like any assistance or advice that relates specifically to your property and your local market, our team is available to assist you at any time, so don’t hesitate to call.