What does the future hold for property prices in 2020?
One of the questions we all want to know the answer to is what will property prices be like in 2020 – just four years from now?
It is true that no one really knows what the future holds and anything could happen; however, by looking at past data, this can help us predict the future with more certainty.
These last few years has certainly seen Sydney stand out from the crowd with phenomenal levels of growth, so if you had bought property before this growth, you would have done extremely well and would have easily made $100,000 or more, depending on where and when you bought. Melbourne should not be overlooked either, this capital city also saw percentage growth in the double digits. However, other Australian capital cities saw a much more stagnant level of growth.
So what does the future hold for property prices in 2020? We take a closer look at Sydney, Melbourne and Brisbane property markets.
Sydney Over the last couple of years, Sydney has experienced some staggering growth. Even though 2016 has experienced a slight slowdown and an ease in property prices since it’s 2015 high, properties here are still some of the most expensive in Australia, and there is still a lot of competition, reflected through strong auction clearance results, where week ending Sunday 20 November 2016 secured a 77% clearance rate.
The heat hasn’t left the property market just yet; however, this might change in the next four years. It is unlikely that property prices in Sydney will continue to rise, especially at the rapid rate seen these last few years. Firstly, there is the affordability issue and salaries are not rising at nearly the same pace, so for many property buyers, especially first home buyers, the housing affordability gap is widening.
Migration is also another key reason as to why property prices are still high, as is the low interest rate environment. Overseas migration into Sydney has rapidly risen in the city, helped by its strong job opportunities, whilst it is also important to remember that New South Wales’s migration has also been low since 2010. Interest rates are currently at an all-time low and are unlikely to remain at 1.50 per cent forever. By 2020, it is expected that interest rates would have increased from the current historic lows and might even fall further before rising. Sydney is also undergoing a shortfall in housing, so with a rising population, this is creating strong demand.
According to CoreLogic RP Data’s Senior Research Analyst Cameron Kusher, he expects that both Sydney and Melbourne’s house prices will continue to grow as long as the interest rates remain at their historically low levels.
“It is hard to see that happening as strongly as it has these past five years, but as long as the fundamentals remain, there will be growth. As interest rates start to rise, we will see this growth tapering.”
Investor Nathan Birch, Co-Founder of Binvested, also believes that there’ll be “a couple more years of solid growth” in Sydney.
“Maybe not quite the double-digit growth we’ve seen in the previous few years, as there is still a shortage of supply and a strong confidence level based around the historically low interest rates,” Birch says.
Senior Property Consultant, Alex Goldhagen at iBuyNew also agrees with the strength of the Sydney market, commenting “There is a perception in the market that Sydney is experiencing an oversupply of new property but that is simply not the case. There has been a serious undersupply since 2005 and only recently have we started to meet that demand. This will result in a slowing of growth but certainly still an upward trajectory in prices.”
Melbourne, just like Sydney has experienced strong levels of growth these last few years; however, over the next few years, it is expected this growth will start to slow down or flatten out.
There will be a number of new apartment developments completing these next few years which might see some oversupply in the market for a while. However, Melbourne’s population is still growing strong and has benefited from a surge in internal migration due to good job prospects and relatively affordable housing, compared to Sydney prices. Melbourne had the highest net internal migration gains of all Greater Capital Cities in 2014-15 (6,600 people), whilst Victoria gained 55,447 persons through net overseas migration.
With its status of the world’s most liveable city for the sixth year running by the Economist Intelligence Unit’s Survey 2016, Melbourne is still an attractive place to invest, but with hikes in stamp duty surcharge from 3 per cent to 7 per cent and the land tax surcharge for absentee owners from 0.5 per cent to 1.5 per cent, this could put off foreign investors from purchasing property here as time goes on.
What do property prices look like for Brisbane? Brisbane is one capital city that should not be overlooked and there is certainly room for growth here. It has recently seen a change in government with all the former government’s public job cuts now over. The city is also experiencing plenty of growth from new apartment construction as well as new infrastructure projects including the Brisbane Airport Regeneration, with other projects set to commence including Queens Wharf and Brisbane Live. This will create thousands of new jobs, attracting more people to live and work here.
Brisbane also had the second highest net internal migration gains of all Greater Capital Cities in 2014-15 (4,000 people) which is helping to drive this property price growth. It is also expected that Brisbane’s population will double in just 15 years from 2.2 million in 2015 to 4.6 million by 2031, creating high levels of demand. Brisbane City Council has been set the target by the State Government of approving more than 223,000 new homes over a 30-year period to keep up with the city’s growing population. In order to meet this target, the rate at which these new homes are being built in Brisbane will have to increase by nearly 50% and the majority of these new homes can only be delivered through the redevelopment of existing properties.
With Brisbane’s property prices far more affordable compared to its east coast rivals, Sydney and Melbourne, many investors and first home buyers in particular are making the most of this low interest rate environment to purchase a property. Brisbane has only seen a slow amount of growth these last few years (1.6% increase for all housing from February 2010 to February 2015) and with the city sitting in a rising market, property prices are likely to grow over the next four years, making this an ideal time to buy property in Brisbane if you are looking for a city with growth potential.
With record low interest rates, many more investors as well as first home buyers are dipping their toes back in the market to make the most of lower mortgage repayments whilst they can. There is also demand from foreign investors, particularly Chinese who are also on the lookout for new investment opportunities in Australia.
To find out more about the best places to invest in property and how the next four years could affect your property purchase, it’s best to get in touch with iBuyNew and speak with one of our expert Property Consultants.
Call us today on 1300 123 463 to learn more about what the future holds for property prices in 2020.
Published on 21st of November 2016 by Marty Stanowich