According to statements made by Dr Andrew Wilson, the chief economist of Domain, 2016 will be a flat year for real estate properties in Sydney. Wilson added, “I’ve been predicting up to a 4% property price growth rate in Sydney, and about the same nationally. Economic circumstances are now set to deteriorate and it will be a year of circumspection.”
But there is good news. Dr Wilson expects real estate prices in Adelaide, Brisbane, Canberra, Melbourne and Hobart will rise and not deteriorate.
The last occurrence of dipping housing prices in Australia was back in 2008, in the wake of the global financial crisis. While the outlook this year isn’t looking positive for Sydney, there are suburbs that will hold up better. And how can you tell which of these properties are expected to experience dipping prices? Based on the nation’s top real estate economists, you can intelligently foretell which suburbs will take a dip or a fall by watching out for five factors.
Factor #1: Interest Rates
Interest rates are an excellent indicator of the value of cash. If the benchmark for interest rates is currently low, there will be less repayments of home loans. This also means that there will be less money earned in cash accounts.
According to the chief economist Nicki Huntley of Urbis, a consulting firm, speculation of interest rates is key. Huntley also added, “That’s one of the reasons why I don’t think this cycle will be sharp because outlook for rates is soft.”
Factor #2: Supply Dynamics
Look into the amount of nascent development occurring in your suburb. Make sure you furthermore determine whether the development involves detached homes or units.
Factor #3: Growth of Wages
If salaries are not increasing in your suburb, then it’s safe to assume that buyers will be unable to afford higher home prices.
Factor #4: Unemployment
The less people have jobs, the less will there be a pool of buyers who can afford to pay mortgages. Less people will be investing as well.
Back in the financial crisis of 2008, for example, the Brisbane suburb of Logan took a huge hit. Logan, according to Dr. Wilson, is an affordable area and has plenty of infrastructure. Despite its attractive points, Logan prices weren’t able to see significant growth since unemployment floated about 10 %. Fortuantely, real estate prices in the suburb are now seeing some growth, thanks to falling unemployment rates.
Factor #5: Atmosphere
While not as scientific as the other factors, it pays to look into the “feel” of a suburb if you want to determine the decline or growth of housing prices. When assessing an area to make an intelligent guess about pricing, take into account factors that add to the vibe of the place. Is the local park well maintained? Do residents keep their lawns in shape? Are there businesses shutting down? What are the restaurants and shops in the area?