Are you thinking about buying a luxury property in 2017? It's a good year to do so, particularly in Sydney, as foreign buyers are being pushed out of the buying market somewhat by new stamp duty regulations. With less demand for luxury homes from this market, you'll have more of a choice about what you buy, and there's plenty of new luxury apartments in Sydney from Crown Group to peruse.
Mansion Global data shows that there was a 0.9 per cent growth in the median luxury apartment value through September 2015 to September 2016, while many other luxury markets around the world stagnated. While an overall lack of supply for Sydney homes through to 2018 is predicted, according to the QBE and BIS Shrapnel Australian Housing Outlook for 2015-2018, construction of new residences will offset that over the next few years.
If you've been considering getting into a new luxury apartment for some time, now is as good a time as any to strike.
For 2017, though, what factors, domestically and abroad, will have an impact on the luxury property market in Australia?
Chinese demand for Australian property
Chinese investors in Australian property continue to be a major boost for the market. However, they have started to turn toward more affordable homes, according to realestate.com.au. In 2016, these buyers moved toward the Brisbane markets, where there is a far lower median price point than in Sydney. For affordability, that's where investors should be looking.
That could do wonders for the luxury market in 2017, especially for availability and competing during the bidding process. With fewer potential buyers (because the Chinese contingent has started looking at more affordable homes) it could be far easier to snap up that picturesque apartment with a view over the greater Sydney area that you've been waiting for.
In fact, with Chinese investors typically turning away from the higher price point of the Sydney market, buyers of luxury property could see a far less crowded landscape. A December 2016 article from the Australian Financial Review (AFR) showed that Sydney's house prices have increased by 67 per cent over the last four years. Sydney has become Australia's 'least affordable' market overall by dwelling value, which makes it much less attractive for buyers looking for a cheap investment in 2017.
Overdeveloped apartment markets could push buyers to Sydney
Brisbane and Melbourne apartment markets are currently being developed in abundance. While apartment approvals are down in Melbourne by 11.4 per cent between August 2015 and August 2016, there are still more than 20,000 apartments that are under construction right now, as stated in a Jones Lang LaSalle (JLL) report from November 2016. These are all predicted to be completed by the end of 2021.
In Brisbane, the volume under construction is lower, but approvals are higher, according to a separate JLL report. Between August 2015 and August 2016, there were 9,214 apartments approved for construction, which was an increase of 13.8 per cent over the previous 12 months. Right now, there are 13,000 apartments that are due to be completed before the end of 2019, which makes Brisbane a hotspot for affordable apartment buying over the next few years.
As supply increases, rental yields will drop in these cities – more choice for rentals means landlords must compete for the best weekly prices, and tenants have the power to walk away from somewhere that's too expensive. As rental yields are potentially going to be worse in Melbourne and Brisbane for investors, they could turn back to Sydney which has typically been a strong performer for landlords.
The cash rate will impact Sydney prices
The current cash rate, as set by the Reserve Bank of Australia, is 1.5 per cent, and has been since August 2016. However, if that drops by 25 percentage points, for example, the dwelling prices in Sydney are predicted to rise by as much as 18 per cent, according to the AFR.
Don't let the Reserve Bank of Australia dictate how much you have to pay for your next apartment.
Of course, buying in the luxury market is less dependent on immediate affordability. People don't buy at the higher price point if they're strapped for cash, or in an unstable employment situation. That doesn't mean an increase of 18 per cent on top of what you would pay for a luxury apartment in Sydney right now is to be sniffed at. No matter how much you're looking to spend on a new home in the New South Wales capital now, you don't want that to increase by another fifth simply because you waited six months before making your move.
Don't let the Reserve Bank of Australia dictate how much you have to pay for your next apartment. It's difficult to predict (in the long-term) how the Reserve Bank will move in terms of the cash rate – and an 18 per cent increase in dwelling prices is too big a gamble to play with.
For more information about what luxury apartments are available, or will be soon in Sydney, get in touch with Crown Group today.