Is 2017 going to show a slow down of Property Prices?

January 6, 2017 9.59 am by. Lyndell


Is 2017 the year of subdued property prices?

Despite experiencing strong demand throughout 2016, REA Group is anticipating the end of the property boom in 2017.

“While still early into the new year, the easing of demand nationally suggests that the record price rises we saw in Sydney and Melbourne last year are likely to be more subdued as we move further into 2017,” REA Group’s chief economist Nerida Conisbee said.

“The key drivers of this demand decline are likely due to Australian banks increasing interest rates for buyers independently of the Reserve Bank of Australia in late November and early December and continuing affordability issues across the eastern seaboard,” Ms Conisbee said in January 2017’s Property Demand Index.

The group saw strong growth on in 2016, reporting a 16.2 per cent increase in demand over 12 months.

Despite this, Ms Conisbee said REA Group is not expecting it to continue into 2017, especially after a 6.6 per cent dip in demand nation-wide in December 2016.

“The states which saw the largest declines in demand in December were New South Wales and Victoria. Continued concerns about apartment oversupply are starting to cause concern in these markets with demand for apartments dropping by more than 7 per cent in both states,” Ms Conisbee said.

REA Group has listed affordability as one of the drivers behind the predicted stabilisation of the market, especially in light of a potential future RBA cut.

“Given the RBA has indicated that it may still cut the cash rate further, the banks have sent strong signals that they will respond by not passing cuts on to borrowers and we expect out-of-cycle interest rate rises by banks to continue. This will be a key issue for borrowers this year, especially first home buyers and investors, with access to cheap money becoming more difficult,” Ms Conisbee said.