Melbourne to take Sydney’s place as Australia’s property king in 2016

Property Investor

New research predicts Melbourne to overtake Sydney as the best performing capital city market in 2016.

The report, called the 2016 Housing Boom and Bust Report, was compiled by SQM Research and says Australian property prices will drop to their slowest pace in three years next year. 

In the year to the month of June this year, average capital city property prices have jumped 9.8 per cent across the country, and SQM say that will fall to between 3-8 per cent in 2016. 

According to the report, the slowdown will mainly occur because of a slowing market in Sydney.

“Melbourne is forecasted to overtake Sydney and be the best performing capital city in 2016 with a forecast rise in dwelling prices between 8-13 per cent,” the report says. 

As expected, the report says the slowdown will be driven by market corrections in Perth and Darwin due to the resources sector slowdown, regulatory action taken by APRA, the slowing economy and Westpac’s recent lifting of home loan rates. 

Managing director at SQM Louis Christopher told despite the fact the low Australian dollar, low interest rates and the ongoing strength of Melbourne’s property market would help protect the nation from a complete price correction, there are downsides approaching. 

“One of the key risks to the housing market over the medium to long term is the looming threat of global deflation, and this is quite a danger to our markets here given the level of debt in the housing market right now, which we note has risen again against incomes over the course of 2014/2015 to be at all-time highs,” he said. 

The report agreed with most other economists in predicting property price falls in Perth and Darwin next year, and that all other capital cities will still experience growth in 2016. 

“We believe that Melbourne will be the outperformer of the year followed by the Gold Coast and Hobart,” Mr Christopher said. 

According to Mr Christopher, rents in Melbourne should experience growth somewhere between 4-7 per cent despite fears of a property, and in particular apartment, oversupply. 

“We believe the threat of a massive oversupply in Melbourne has been overstated,” he told

“Indeed, our vacancy rates for that city have fallen for the year as population growth and housing formation have quickly absorbed the new stock being completed.”


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