An unexpected surge in property prices in December has seen Melbourne’s housing market finish the year 13 per cent higher in value than when it started.
Despite crackdowns from banking regulators and some banks lifting the price of borrowing for investors in attempts to cool the market, the five main capital cities in Australia showed a combined capital growth in excess of 10 per cent for 2016.
Out of the five major capitals, Perth was the only market to go backwards, losing ground on capital growth value.
The figures for 2016 reveal the Australian property market in something of a five-speed scenario, where Sydney and Melbourne are the top gears, Hobart and Canberra are the second gears, Adelaide and Brisbane are the third and fourth gears with lower rates and growth and Perth, coming out of the construction phase mining boom is in bottom gear, or reverse even, down 4.3 per cent in 2016.
The figures show Melbourne’s housing cycle has stretched longer and stronger than most predicted – it’s been going since 2012 – thanks largely to ongoing RBA rate cuts that have seen the official interest rate hit record lows amid the sluggish national economy.
While forecasters were too quick to predict a slowing of the housing market, they are nevertheless confident 2017 will see things begin to slow down in Melbourne.
With the problem of apartment over supply in Melbourne confronting the industry over the coming years putting downward pressure on confidence and prices, banks have already started lifting their own rates for property investors and look set to do the same for owner-occupiers in 2017, with or without a cue from the RBA’s own cash rate.