AUSTRALIA’S property market upswing is expected to “peter out” in 2018 given the outlook for interest rates, cooling house prices and tighter lending restrictions, according to consulting firm Deloitte.
The Deloitte Real Estate Outlook 2018 launched today paints a generally positive picture for the real estate sector this year, but one not without risk.
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The report noted the current residential property upswing had seen strong price inflation of around 47 per cent across the capital cities since December 2012, driven largely by Sydney and Melbourne.
It found slower price growth in the Brisbane market in 2017 likely reflected low employment growth and the risks of oversupply in the apartment segment, but that may have bottomed out.
Looking ahead, Deloitte expects underlying demand for residential property in Australia to remain solid, with strong population and jobs growth expected to continue into 2020.
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The outlook for construction activity in the near term varies across the states, according to Deloitte’s report.
Housing construction fell in Queensland last year after reaching its peak in mid 2016.
“Despite population growth edging higher, housing construction is likely to remain relatively flat in the near term,” the report said.
Deloitte real estate national lead partner Alex Collinson said the road ahead for the property industry looked more certain, although some markets would not be as buoyant as they had been.
The report’s macro-economic outlook for 2018 has Australia remaining at the upper end of developed economies for projected growth, supported by population growth and links to Asia.
But household debt has escalated, with house prices and our household debt to income ratio now the second highest in the world — behind only Switzerland.
“The good news though is that global economic growth picked up during 2017, driven greatly by Asian economies,” Deloitte Access Economics economist Kristian Kolding said.
The Deloitte Real Estate Outlook 2018 also considers the impact of the banking royal commission, which starts hearings in March.
The report noted the inquiry may raise the effective cost of borrowing, as banks were likely to respond by continuing to limit lending to risky initiatives, including some property development and foreign borrowers.