What property market trends can you expect in 2018?

After 2017 being one of the hottest years for the property market across Australia, there is a lot of speculation as to whether this will continue for 2018.

While we don’t have a crystal ball to look into, these are the 5 key trends property economists agree upon for the coming year.

1. Mortgage rates are expected to rise

Financial markets predict the Reserve Bank will lift the official cash rate off the record low 1.5 percent level late in 2018.

Higher RBA rates mean repayments will increase, typically $50 for every 25-basis point rise on a $400,000 loan.

But even if rates don’t rise, borrowers should prepare themselves for higher mortgage rates.

The Reserve Bank delivered sets of rate cuts in 2011-13 and again in 2015-16, however major banks didn’t pass the full cuts on to borrowers, and although the cash rate has not changed in 15 months, mortgage rates have continued to rise.

Whether the Reserve Bank does find a way to raise interest rates in 2018 or not, one thing is clear – mortgage rates are unlikely to decrease in the near future.

2. Property prices will continue to cool

Property prices across both Sydney and Melbourne showed a noticeable slow down towards the end of 2017, and experts expect this to continue in 2018 as banking regulators want to see an easing off for house price growth.

APRA’s policy tightening has caused weakness in the property sector, as tightening on investor borrowing and interest-only loans has resulted in higher interest rates for those borrowers, and lowered demand for housing.

Importantly though, while prices will continue to cool there is still nothing to suggest that prices are going to enter widespread declines.

3. There will be a comeback in first-home buyers

While investors take a step back, first-home buyers will find more opportunities in 2018 as they continue to benefit from competitive interest rates, new concessions (if eligible) and ample apartment stock.

First home buyers continue to face a deposit burden but once they are in the market, low-interest rates mean that repayments are affordable, and the interest bill has been falling.

4. Upgraders will opt to renovate instead of move

Hefty stamp duty taxes on property transfers are keeping Australians in their current home. As the stamp duty due on a median-priced house in Sydney and Melbourne hovers about $50,000, homeowners increasingly opt to stay where they are and renovate instead.

Upgraders are avoiding costly moving costs such as stamp duty, while also taking advantage of lower interest rates to leverage the extra equity in their property to finance renovations.”

HIA economists predict strong growth in the renovations market through into the early 2020s.

5. Big wins for owner occupiers from competitive lending rates

With limits on investor and interest-only growth, banks are competing over a smaller piece of the lending pie, and are offering some great deals for owner-occupiers.

Morgan Stanley analysts confirm that while investor interest rates have been significantly tightened, owner-occupier principal and interest loans have seen smaller increases.

In the past year, the major banks’ interest-only investment property loans have been repriced ~90 basis points, while principal and interest owner-occupier loans have been lifted just 10-15 basis points.

Find out more

To find out more about the 2018 property market, we encourage you to attend our inaugural Property Investment Night where you will have the opportunity to meet a select group of unique property groups, each industry leaders in their niche area of expertise.

If this article has raised questions regarding your personal situation, please contact one of our Partners Lending specialists today on 1800 333 143.

This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.