Property investors are changing their investment mix, interest rates are set to move, and we are witnessing fairly suggestive demographic trends (and also gentrification trends). What this means is that the property trends are going to change, too. Let’s find out more about the top 3 property market trends.
1. Where the interest rates move?
There is widespread speculation about the fate of the interest rates this year. Some feel they will go up as part of a long-due correction. Remember, they were this low for long because the government wanted to shift focus from the mining to the construction sector. There are others who feel that with inflation under control and the Aussie dollar not devaluing further, rates may hold for a better part of the year.
Of course, a lot may also be determined by how China plays this. However this may pan out, the changes wouldn’t immediately impact the property market. It usually takes a whole term for the interest rate changes to alter the composition of property market spending.
Stiffer lending guidelines
Till very recently, the banks had acted in accordance with the RBA. Their rate cuts had gelled with the cuts proposed by the master bank. However, of late, they have begun to act out of their own will and also proposed cuts in variable rates when the RBA held its own rate.
Interestingly, their lending is all set to use stiffer guidelines and the squeeze may be felt by the property investors in a short time from now. All said, it will be wise for the investing fraternity to understand how they are positioned at the moment and if they will need to run for cover if the rates correct themselves drastically.
2. Close-to-CBD properties
The one demographic trend which is hard to miss is Sydney’s recent appetite for close-to-CBD properties. Sydneysiders no longer yearn for suburban McMansions. They are quite keen on living close to the CBD and enjoy a life full of amenities and luxuries. Also, areas like Darlington and Waterloo are likely to do well given that natural borders of Sydney will command that the city’s real estate expansion heads to the south.
While buying properties in the CBD area, remember to ask yourself, which suburbs are going to expand most (look for cues from the local council)? Where will the nearest train lines be? Which neighbourhood will have renovation-worthy properties?
3. Rental yield has suffered
Properties in Sydney have registered fairly high capital growth and the rental yields have suffered. With properties selling for a higher price and rents remaining the same, the yield was bound to come down. This has made those investors back away who look for a positive cash flow.
So, what mindset you have come with is important. If you are seeking negative gearing and its benefits and do not mind paying part of the mortgage out of your own pocket, you can have a good time in the current market scenario.
Mellowed down growth expected
I feel that the growth in Sydney this year will be nothing like it has been over the last couple of years but this, in fact, will be in line with the property cycle trend. We are in the consolidation phase and a mellowed down growth is a key component of such a phase. However, those who feel that Sydney is on a second wind, I just have this to say- Sydney is way more resilient than any of us and has got a mind of its own.
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