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2018 Market Outlook
It's Christmas again when people start asking me what I think the market is going to do next year.
I got it pretty much right last year so I thought I'd double down in 2018.
This next year is a bit more complicated than last year. The federal government have been very busy trying to dampen down the market to give first-time buyers and young families more opportunity. Some of these measures are fairly benign e.g. letting people over 65 sell large houses and stash up to $300,000 into a retirement account.
Others are targeted very strongly at investors and they are starting to bite. What effect they're going to have on the southern Gold Coast where position seems to dominate buying decisions is hard to tell at this stage.
APRA restricting interest only loans to 30% of new mortgages is certainly having an effect.
During the September quarter interest only mortgages were only 16.9% of new mortgage lending, a record low, and well down from the 30.5% in the June quarter. Of the new mortgages $67.217 billion was for owner occupiers and $30.994 billion was for investors. The value of lending to investors was the lowest since the March 2016 Quarter and is down 9.1% over the quarter and down 6.6% over the year.
Conversely, the value of home loans to owner occupiers rose to its highest quarterly value since December 2015.
The other big tax related measure is the removal of depreciation for fixtures and fittings in secondhand rental properties. In a fairly new 200 m2 property this can result in the loss of about $20 – $30,000 of offsets in the first five years of the investment.
We think the owner occupied market will remain strong through the year. How many investment buyers enter the Southern Gold Coast market will depend on whether the capital gains available for houses and units outweighs the loss of depreciation and the need for principal and interest loan repayments unless you are a very good client.
Based on recent price rises, we think most investors will go for position and Capital Gains over new properties and write-offs.
There are a number of new projects around the Southern Gold Coast that meet both requirements and sales of these properties are going well. Incidentally most unit buildings are also largely presold before they ever come out of the ground.
To summarise these are the things that we think will affect the market for real estate in our area in 2018.
The shortage of listings and consequently the number of properties available for sale. This table is from RP Data and compares sales to the end of August 2017. Overall there were 131 less sales in 2017.
Removal of depreciation on secondhand properties:
We covered this recently in a blog article about parliament passing changes to depreciation laws - which contains a link to a simple calculator.
Restricting interest only lending:
See a recent Blog article we covered on Reserve Bank and APRA directions on loan to valuation ratios.
The amount of capital works available going forward after the Commonwealth Games.
Exchange rates which affect the number of international tourists we see.
The impact of job creation and the amount of rental stock in that part of the market.
by David Hamilton
2018 Market Outlook
palmbeachfn.com.au December 2017 First National Palm Beach 18 Sixth Ave Palm Beach, Queensland 4221
Phone: 07 5559 9600