By Charles Tarbey

Many Australians have long perceived property to be, for the most part, a safe and stable investment. The ‘great Australian dream’ embodies this perception, where one of the biggest goals one can work towards in life is owning bricks and mortar. 

Looking back on this year, it is evident the value placed upon property has only been enhanced. A climate of record low interest rates propelled the market beyond what many expected, as Australians took advantage of this opportunity to transact property and capitalise on the continued phase of growth in many markets. 

Local and international political events caused uncertainty in markets around the world, however, despite this, it seemed that Australian property remained unaffected, as every capital city (except for Perth) is now showing a positive annual trend in dwelling value growth according to CoreLogic. The end of November saw Sydney and Melbourne dwelling values up 13.1% and 11.3% respectively over the year.

As property continues to be perceived as such a valuable asset class, the constant chatter and speculation about what will happen next is inevitable. Australians continue to eagerly discuss the outlook for real estate over the coming year.  

Moving into 2017, I am of the view that the Australian market may begin to moderate. In light of this, here are three New Year’s resolutions to consider as we likely enter a new phase in the property cycle. 

Resolution One – Manage your expectations 

The last few months of 2016 have been characterised by lower stock levels and strong demand in some markets, creating great conditions for sellers who have been able to achieve prices well beyond what was expected in some situations. 

Following this, vendors may continue to base their price expectations on those achieved during this strong year in real estate, but this may not be realistic in a stabilising market. 

I remind vendors that it will be important to align your expectations with changing conditions. We may encounter lower clearance rates at auctions if vendor expectations are higher, in some instances, than what the market can support. 

Understanding local market dynamics and recent sales, as well as speaking to a local real estate agent with a strong knowledge of the area may help to manage your expectations and ensure there is minimal disparity between your ideal price and what can reasonably be achieved. 

Resolution Two – Expand your search 

For many, property is a sentimental investment and while emotion is an undeniable influence, I find that some can let it cloud a good investment decision.  

Others don’t want to buy where they can afford, they want to buy where they want to live. For example, those working in the city understandably want to live as close to work as possible, but this may not always come at a cheap price. 

I encourage Australians to put their emotions aside, and expand their search when hunting for an ideal property. It may be beneficial to look for suburbs that aren’t picked as ‘hotspots’, or areas that may have some negative connotations to them.

In these areas, there can be great room for potential. For example, we are seeing some areas that have previously seen bad news or less favourable reputations experiencing value growth due to development, transport and new infrastructure. 

Often the realities of an area can be very different to what people perceive. It will be valuable to remember that things change over a period of time – these areas may prove to be a good investment in time and may ensure that you are not over-leveraged. 

Resolution Three – Remain cautious of interest rate movements 

During mid-December, we saw the US Federal Reserve raise interest rates for the second time in a decade. I believe this should serve as an important warning to Australians about the potential for interest rate movements in the New Year. 

While we do not have a crystal ball to predict future economic conditions with certainty, this may be a precursor for an upward lift in Australian rates in the near future. 

Over the coming months, careful contemplation about mortgage commitments will be incredibly important. While low interest rates and cheap finance has been an appealing prospect for many, I remind Australians that even a slight increase of a percentage on some loans can represent a significant increase in repayments. For those who aren’t prepared, this can be devastating. 

The prospect of shifting interest rates is not a completely unlikely scenario, so for Australians wishing to enter the market or purchase a new investment in the New Year, careful consideration should be afforded to ensuring your financial circumstances can withstand fluctuations.  

After an extended period of growth, the thought of a stabilising real estate market may be met with concern by some. However, with long-term goals for holding property, which is our preferred strategy, you will be placing yourself in a good position to ride the ups and downs of the real estate market. I encourage Australians to keep these resolutions in mind and as always, seek professional advice to ensure the greatest prospect of success for property transactions in 2017.