Pundits have wasted no time forecasting what’s likely to happen in the Australian property market this year. These are their top predictions in 2017.

  • The interest rates will increase.
  • According to economists and industry experts, the country is now at a record low interest rate.

    While more than half of the experts on Finder’s interest rate panel expect at least one cut in 2017, 26% expect a rate rise. This is a marked change from September 2010, when there was no discussion of an interest rate rise. If there were to be a rate hike, this would be the first one since November 2010.

    Many people who expect a cut believe that it will happen in the second half of the year. Others, including Mortgage Choice’s Jessica Darnbrough and University of Queensland’s Clement Allan Tisdell, expect a rise in March.

    Others believe there is a high chance of a rate increase.

    Dr. Andrew Wilson, chief economist at the Domain Group, said it was “fanciful” to expect rates to increase. He says cuts are more likely due to the “very sobering GDP number” for the September quarter. 

  • It is predicted that apartment construction will decline.
  • The record-breaking number of dwelling approvals across Australia and Sydney was one of the highlights of the 2015-2016 housing market. However, there have been some improvements and this will likely continue to 2017.

    BIS Shrapnel, which provides industry research and forecasting, stated that a drop of 6% in building start ups for the 2016/2017 fiscal year was possible. Further declines were seen in the national economy from 2017-2018.

    The latest BIS Shrapnel building forecast report shows that after reaching 230,000 building commencements over the past financial year, levels have reached a “turning point” with the attached apartment market set to fall 10.6%.

    Chris Johnson, chief executive officer of the Urban Taskforce, stated that Sydney will need an additional 36.300 homes every year for the next 20 years. 

    “In boom times like we have now this should be over 40,000 yet the current yearly figure is only 30,319 new homes,” he said. “A significant concern with the number of conditions on approvals is that the banks are not lending on the basis of these extra costs so this is reducing the supply of housing in metro Sydney with the inevitable consequence that housing costs go up making affordability even harder for first home buyers.”

  • The trend in property prices won’t change.
  • It’s hard to expect the Sydney and Melbourne property markets to grow any more in value. Experts expect that these markets will continue to grow, but at a slower pace.

    Douglas Driscoll, chief executive officer at real estate agency Starr Partners, anticipates that “market conditions will not change a great deal from what we’re currently experiencing” with continued rises at a more subdued level.

    “In the absence of further macro-prudential measures or an unexpected rise in interest rates, investors will continue to be prevalent; leaving scores of first home buyers still on the sidelines,” he said.

  • It will be more difficult to obtain a mortgage.
  • To make it more difficult for borrowers to obtain a mortgage, regulators and lenders will continue tightening the regulations.

    “I think we can expect more macro-prudential measures in 2017,” Driscoll said. “Lenders will absolutely become more prudent and fussy on what they lend on – even the International Monetary Fund believes property affordability in Australian is an issue and home owners are stretching themselves too far.”