3 Red Flags Property Investors in Australia Must Watch Out For In 2017

By : Nick Marr

Many comments have been passed by analysts regarding the rise of Australian property rates. According to these statistics, Sydney is expected to see a 7-10% growth, Melbourne a 9-10% growth and Brisbane a 6-7% growth.

2016 saw a surge in the real estate prices with more and more investors, both domestic and foreign, investing in properties in Australia’s major cities. The reasons were record low-interest rates, net migration, offshore buying, and a continuous boom in the economic sector.

However, 2017 is a different case. Many are predicting that the real estate market will cool down this year, while others are of a completely different viewpoint.

Whatever the case is, there are some key players that will determine which way the market goes. Yes, we are referring to the major banks (Bendigo and Adelaide Bank Ltd which is one of them) who have been increasing their interest rates on investor loans. This is a warning sign for investors and residential homeowners!

In this article, we will take a look at 3 such signs that will determine the course the property market takes in 2017 which surely needs to be looked at.

A Toppy Property and Share Market Waits:

All those investors in the Real Estate Investment Trust (RIETs) must prepare themselves for a toppy property and share market which will put excessive pressure on returns. Despite a moderate return in the last few years, shares of the BWP Trust and Scentre Group still trade at a premium, ones which after the fumbling changes in the economy and interest rates, could become more sensitive.

Returns on Commercial Properties will Decline:

Image result for commercial property australia

It is also expected that in 2017, the ROI on commercial properties will also see a decline, as predicated by PricewaterhouseCoopers (PwC). To strictly quote, PwC believes that we could potentially be at the top of the cycle, given the leverage for a compact spread between capitalization rates and interest rates in case the interest rate increases. If this happens, many big investment operators will feel the effects.

Falling Apartment Prices:

The increased likelihood of a decline in apartment prices is enough to worry all those investors who planned to invest in one after observing the construction boom in the three biggest states of Australia. The time of construction companies and property developers to make it big in Sydney and Melbourne is nearly up. If this sector is to see a decline, it will be foolish to invest in one.

What Does it Mean?

Just because most of these warning signs predict a stagnant property market in 2017, you should know that these are only predictions. No one really knows which way the property market in Australia is headed. With more and more foreign investors striving to make it big, there are a myriad opportunities just waiting to be grasped.

By looking at the current property market standing, the low interest rates, valuation concerns and record-high market shares, it is best to stay well-informed. It is the right time to consult an agency specialising in investment properties to use this current leverage to positively influence the property prices and to look for other sources of tax-efficient income.