Australian Property Market

Australian Property Market on the Rocks

For years, it seemed like the Australian property market was as solid as it can be and that nothing could have shaken it. Not even the economic recession that swept the globe affected it very much. However, lately, vacancy rates have been climbing a steeper and steeper slope and prices have been deteriorating rapidly. The Australian property market seems to have finally run out of luck.

Low population, but plenty of homes

Over the next three years, it is projected that low investor demand and a rising supply will influence the direction the prices will go. The years 2016 and 2017 are expected to have an oversupply of available properties (which were once in undersupply) thanks to an increase in building completions at a time when the population is just not growing at the same rate as it used to.

The most recent BIS Shrapnel report indicates that over stock in other markets is also expected to continue to be a reality.

SQM Research shows that the national vacancy rate increased approximately 0.1% in June, reaching 2.5%, which is high for Australia. This recent increase is mostly due to the Perth property market, which influenced the national numbers. The difficult conditions here made the vacancy rate skyrocket to 5% from 0.3% month-on-month; that’s the highest it’s ever been.

What does this mean for the market?

In practical terms, this increasing rate is having a very real and negative influence on the rental market in Perth. A higher number of vacancies means that rates are decreasing at a fast pace. Does this mean that property prices could begin falling not only here, but in the entire country?

The situation is definitely delicate, especially considering the construction boom. There are more buildings than there are buyers or renters, which means they are going into oversupply. Over the following years, every state is likely to experience some price pressure.

Ultimately, according to BIS Shrapnel, the property market (along with all other markets) will most likely gradually decrease and it is projected that in the 2017-2018 and 2018-2019 period, we will witness the flattening of prices, or even a general decline.

All in all, there is no telling what the property market will behave like, but based on all numbers and current trends, the market is in for a bit of a rough patch and Aussies who are property owners, landlords, or are planning to sell, should be prepared for the dip in prices.

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