22 Jan Sydney cools as Melbourne heats up – Steve Jovcevski
Property expert Steve Jovcevski expects prices to further cool in Sydney while Melbourne is set to spike. Brisbane houses should slowly increase while Hobart will continue to be the star performer. Hear all his predictions for 2018.
Kevin: Let’s do a little bit of crystal ball gazing, which is always a good thing to do at the start of the year, particularly in the property market. This time, we’re going to be having a look at some of the trends of 2018.
Mozo property expert Steve Jovcevski expects that prices are going to further cool in Sydney, Melbourne is going to enjoy a bit of a spike in property value, Brisbane houses should slowly increase, while Hobart is going to continue to be a star performer. He joins me.
Steve, thank you very much for your time.
Steve: No problem.
Kevin: A lot of people are predicting that that Hobart market is going to continue to improve. How much more gas do you think it has got in the tank, Steve?
Steve: I still think it has well over 10% to go. Yes, still a way to go in Hobart.
Kevin: We’ll just walk around in Australia, I think. Let’s start in the Sydney market. A lot of people are predicting that Sydney may have peaked. What’s your view on that?
Steve: I agree with that. We’re predicting minus 5% for next year, approximately. I think that the boom has come to an end in Sydney, and now we’re basically going to see some price stabilization and some falls in areas, so overall around minus 5%.
Kevin: Some of those key areas – inner city and even by the water – are likely not going to depreciate in value as some of the other areas, would you think? It’s hard to say a market like Sydney is going to come back across the board at 5%, isn’t it?
Steve: It will be region to region. However, though, I actually think that some of the more affordable areas will actually do better this time around, and some of those waterfront, the eastern suburbs, the inner west will actually not perform as well, just basically due to the affordability constraints. It’s so expensive now that it’s very difficult for anyone to buy property in Sydney.
At the moment, we do have a first-home owners grant that came into effect in July, and that’s having an impact on the first-home owners market, and I think that’s going to prop up some of the prices in the more affordable areas in Sydney in 2018.
Kevin: Do you think some of those outer areas outside of Sydney, heading towards Kembla, around Goulburn and places like that, are going to appreciate more in value on the back of the fact that Sydney is so unaffordable?
Steve: I do. I think anywhere where you can actually still commute to Sydney will do well, places like the Central Coast, for example, going towards Newcastle from Sydney – so probably an hour and a half out – I think will do well this year. And even the southwest of Sydney, which is probably the most affordable part of Sydney, still within a 20- to 25-kilometer radius, that’ll do quite well as well.
So yes, I do think some of those outer areas, and even Wollongong, which is as you mentioned not far from Goulburn and all the rest, so that will perform quite well as well, I think.
Kevin: There’s some concern about Melbourne, particularly with the unit market. Is that what you’re seeing in Melbourne as well?
Steve: Yes, inner city Melbourne, the docklands area, the apartment market is struggling. But I still think that it’s going to do well in terms of the house prices, and the reason is they also have a huge first-home owners market. They’re also much more affordable than Sydney, so I still see them doing quite well in 2018, but obviously not as well as they have been in the last year to year and a half.
Kevin: Adelaide, South Australia, has been a bit of a cot case for some time, a lot of bad news coming out of there. Do you think that’s likely to improve in 2018?
Steve: I think it’s just going to continue on. We saw a price increase of around 3% or 4% in 2017, and I think that will continue into 2018. Adelaide seems to be a much more steady market that goes up gradually. It doesn’t seem to go up suddenly and then drop; it just seems to continue to go up at that 3% or 4%, just above inflation. So, I continue to see that happening in 2018.
Kevin: An improvement anywhere, in any market really, between 3% and 6% is not a bad expectation. I guess we’ve just gotten used to seeing those big increases out of Sydney and in some cases, out of Melbourne as well. We’ve been a bit spoiled there, Steve, haven’t we?
Steve: We certainly have. The fact is that it had to come to an end at some stage. You’re talking about at one stage in a quarter, we had 17% growth in Sydney at the beginning of last year. That was never going to be sustainable; it just had to stop at some stage.
I just think that it’s going to be an orderly reduction in prices. There’s not going to be any collapse or anything like that, but it will come down slightly. But with time, I think it will improve again, after 18 months or so.
And look, it’s an opportunity for some people in Sydney who can actually buy something now without the crazy competition that there was at auctions going back 12 months ago where you literally couldn’t buy anything.
Kevin: Jumping across to the west for a moment, Perth is a market that’s been really quite disappointing and off the boil for some time. There are some green shoots emerging out of Perth, though, aren’t there?
Steve: Exactly. Last quarter, it stabilized. It has pretty much probably dropped slightly. Overall though, it seems like it’s coming to the bottom of the Perth market. It’s significantly dropped over the last few years, and some of that is to do with the commodities crash and the price of iron ore going down, fewer jobs in the area. But I think fundamentally, it’s still a good market with the population growing.
Eventually, it had to come to the bottom, and I think it has come to the bottom, and you’ll see some growth in 2018 in Perth.
Kevin: Canberra has been an unusual market. It’s a market that’s very much reliant, I guess, on what’s happening with public service and federal elections and so on. If you see a lot of job shedding out of federal politics, that’s when we see prices in Canberra start to fall a little bit. But things are not looking too bad in Canberra right now, Steve.
Steve: Yes, absolutely. 2017 was another good year from Canberra. We saw 7% to 9% growth, and we actually think that that’s going to continue in 2018. You have a very tight rental market in Canberra, and that may be, as you mentioned, about the public service or transient workers going there and needing somewhere to live while they’re in our nation’s capital. So, we still see that market going up. We still think that there’s more to come.
Kevin: You mentioned earlier in our chat about markets that improve slowly, around 3% to 6%. I guess you’d put Brisbane into that market. Brisbane and South East Queensland is a market that generally over decades has just been a slow improver, but always an improver.
Steve: That’s the thing. And sometimes, I think that’s actually a better market to be in, because you always know you’re going to get that consistent growth, and it doesn’t create bubbles or things like that in the property market that you might see in places like Sydney or Melbourne at some stage in the property cycle.
Yes, it is a steady performer; however, I do see it starting to pick up a little bit, so I’m predicting about 5% for houses – not the apartments – in Brisbane, and I think it’s going to pick up a little steam towards the end of year.
And the reason is, you find that once Sydney and Melbourne had those big property booms, Brisbane plays catch-up once it’s over, and I think that’s going to happen again. It happened back in 2003–04 in Sydney and then followed on in Brisbane after that, and I think it’s going to happen again. So, I do see things actually going quite well in Brisbane this year.
Kevin: You mentioned there about units in that Brisbane or South East Queensland market. There has been a lot of concern expressed with that, one commentator even suggesting to people that if they own a unit in Brisbane, they should now be considering selling it.
Steve: Property is a long-term game, and if you can hang on to it, I would. Sure, it’s not performing well at the moment – there was asp rice drop last year, and that may continue – but I think if you’re in it for the long term, you’re always going to win in property. So, I wouldn’t be selling if you don’t have to.
Kevin: Steve, it’s been great talking to you, mate. Thank you very much. Steve is from Mozo, Mozo.com.au, he’s a property expert and commentator.
Steve Jovcevski has been my guest. Steve, thank you very much for your time.
Steve: Thank you. Thanks, Kevin. Bye.