What Will Drive Investors In 2015?

Growing demand for inner city apartments in Australia’s largest cities is set to be a key investment driver in 2015.

According to Colliers International’s 2015 Asia Pacific Property Outlook, the rising popularity of CBD living means there will be increased apartment supply in Melbourne, Sydney and Brisbane next year.

Colliers managing director residential Peter Chittenden said state and local government infill policies were encouraging developers to increase their exposure to inner metropolitan locations.

This was evident in the volume of new apartments being developed and approved by local councils, and the strong growth in development site values, he said.

“Buoyed by strong offshore demand, and a rapidly rising inner city population, this is a trend we anticipate will continue in 2015.”

In the strongly performing Sydney and Melbourne CBD markets, the volume of apartments under construction in the next five years will reach 6,000 and 18,000 respectively.

Chittenden said that, although interest rates forecasts were mixed, indicators like unemployment, construction activity and GDP point to a period of weaker overall economic growth.

This should result in interest rates remaining steady in the short to medium term – which is good news for the residential sector and points to continuing demand side momentum.

“The low interest rate environment is a key driver of residential activity in the current market… We anticipate it will provide supportive conditions for strong investment activity in 2015.”

Sydney, Melbourne and Brisbane residential markets will have the strongest residential growth, Chittenden continued.

“But weaker economic conditions in Western Australia will lead to a slowdown in development and investment activity in 2015.”

Overall, the Colliers report predicts that, in 2015, property across the Asia Pacific region will experience a continued increase in investment volumes, improved tenant demand and structural change across various sectors.

2015 Property Market Predictions

Investors need to prepare themselves for modest house price growth across most capital cities in 2015.

The Domain Group’s Australian Housing Market Year in Reviewpredicts that housing markets around Australia are set to experience a year of flat activity in 2015.

This follows on from a year of expansion and strong price growth in 2013 and a year of moderation in 2014.

Domain Group senior economist Andrew Wilson said most capital city markets are feeling the effects of both local economic conditions and concerns over the national economy.

With a weakening economic outlook, particularly in terms of the jobs market, the case is growing for an official interest rate cut by mid-2015, he continued.

“But, without improved economic conditions and a return of incomes growth and confidence, marginally lower interest rates will be unlikely to have a significant impact on housing markets.”

This meant that, in 2015, house price growth for most capital cities is likely to be modest at best and will hover around the inflation rate.

Wilson said the rate of growth in each city will be dependent on local supply and demand factors – rather than the overarching impetus of low interest rates which have driven markets over the last two years.

Sydney, which was the leading performer over 2014, will outperform other capital cities again for the third year running in 2015.

A top performing local economy and the continued undersupply of housing will generate consistent buyer activity over the year, Wilson said.

“The inner and middle ring mid-price range suburban regions are set to continue to record double figure prices growth but, overall, growth is likely to be at least twice the inflation rate.”

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