As we come to the close of another interesting year in the property industry, Place Advisory has summarised 2016’s results and we have outlined our market predictions for 2017.
Overall, 2016 has been a considerably tougher market in comparison to recent years. Following a record breaking year in 2015 for the volume of off the plan apartment sales, the Inner Brisbane market has once again evolved, and we have begun to adjust to a new property cycle.
The effects of the 2016 Federal Election and the uncertainty surrounding policy changes, combined with the introduction of new lending policies for purchasers and stamp duty changes for foreign buyers all exemplified market uncertainty throughout the year. When combined with oversupply speculation, these factors ultimately forced market change and resulted in softer sales results. Overall, Brisbane has now returned to the long term ten year average and a market which is extremely competitive.
2017 Market Predictions
Place Advisory expects that 2017 will be a challenging year for the property industry as the Inner Brisbane off the plan apartment market continues to adjust to the next property cycle.
In our opinion, there will be some great opportunities and trends present themselves. There will be fewer projects enter the market over the next 12 months as a high number of the substantial pipeline of potential developments that we once saw will be deferred. Many sites will be either land banked pending market conditions, or sold to free up cash.
Below we have outlined our top 7 market predictions for 2017.
Top 7 Predictions for 2017
Fewer New Projects
Place Advisory expects to see limited new projects enter the sales cycle throughout 2017. Numerous factors such as changing economic conditions, softening sales volumes, tougher lending policies and a shift in buyer profiles will see many potential projects deferred throughout the year. Positively, this will see long term developers with strong financial backing succeed in this market, delivering higher quality projects with more points of difference.
Year of Smaller Projects
As we enter a new market and normality returns to Inner Brisbane’s off the plan apartment market, Place Advisory expects to see a higher number of boutique projects enter the pipeline as opposed to larger scale developments. As the high level of sales activity has now passed, some developers will seek to lower their risk appetite by moving to smaller scale developments that require fewer presales. The shift from an investor market to a more owner occupier market will also see smaller projects become increasingly popular.
Foreign Issues and Settlement Risk
Ongoing foreign buyer issues and settlement risk are two factors that will be felt throughout 2017. With the majority of Australian banks cutting lending to foreign investors, combined with the government introducing additional taxes, foreign buyer issues will continue to put the property market at risk. As foreign investors approach settlement, the risk of being unable to settle due to these crackdowns on lending will become problematic for some developers.
This will certainly be an area to watch over the next 12 months. As restrictive lending policies continue to be an issue for both developers and purchasers, clever funding solutions will emerge. We expect to see various private lenders offering higher interest rate solutions enter the market. At some point in time, the major banks will return to the market but this is an unknown.
Increased Site Transactions
Place Advisory expects that we will continue to see an increased number of site sales occur throughout 2017. As the struggle for developers to find cashflow to fund construction rises, it is expected that a high number of these projects will be deferred and sites will be sold.
Competition in the market place will continue to increase over the next 12 months, particularly with the amount of recently completed stock that remains for sale. Opportunities for purchasers to secure a newly completed apartment will create more competition between developments and will enable buyers to negotiate and seek out the best value for money investment. Higher levels of incentives will be offered to buyers to close sales.
Existing Apartment Market
Place Advisory expects that the Brisbane apartment market will remain consistent throughout 2017. We do not expect to see significant price growth over the coming 12 months, however as the owner occupier market strengthens, two different markets will emerge, adding an extra dimension to the Brisbane market. Supported by a strong existing real estate market, those looking to downsize will be able to do so and turn capital growth into cash.