What Can You Expect from Residential Property in 2016?

The residential real estate market has been an interesting one this year, marked by record low interest rates on home loans, immense investor activity and rising real estate prices.

Clearly, how individuals feel about the year will be different depending on which end of the market they’re standing in.

House vendors in capital cities like Sydney and Melbourne have benefited from the soaring demand, making great sales off their properties. Buyers, on the other hand, may have found it difficult to afford these prices in such hotspots.

But what can people expect in 2016, and who will the market favour?

Buyers to benefit

Findings from the spring edition of the CoreLogic RP Data Australian Residential Development Outlook predict that the residential real estate market will see good things in the year to come, especially for house hunters.

The Property Council of Australia Residential Executive Director Nick Proud has commented that the outlook for 2016 is optimistic, as a surge of housing supply looks to make its way into the market.

“Residential supply nationally is finally meeting household formation requirements,” he notes, which has helped boost housing supply. Furthermore, the Australian Bureau of Statistics reported that construction commenced on a record 211,976 homes in the year to June 2015. As new houses meet the heavy demand in many markets, this should in turn help to cool prices down.

This is significant, as the Housing Industry Association earlier noted a 2.9 per cent fall in national housing affordability over the June quarter. Again, the massive number of new builds coming through should help to alleviate this.

Owner-occupiers may lead the charge

It’s also important not to forget that the Australian Prudential Regulation Authority’s restrictions on investment credit growth should still be in effect in 2016.

This means that investors may have to give way to owner-occupiers, as banks continue to tighten their lending of home loans toward these types of borrowers. You should expect reduced housing price growth as there will be fewer investors to compete with in the market.

In regards to this, Tim Lawless of CoreLogic RP Data has raised a good point, saying that “this will see new housing commencements, particularly in apartments start to recede.”

If you’re looking at buying property in the next year with a Border Bank home loan, don’t sit on the fence for too long. As investor funding has been a major driver of new building commencements, less lending toward them could mean a drop off in residential constructions further down the road.

Talk to the lending professionals at Border Bank. As we are a member-owned bank, we work for you with low fees, competitive rates and superior service.