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Construction, Business - 4 min read

The Australian Property Market: What Can Builders Expect in 2018?

Jason Hook

Head of Sales and Marketing

Dec 4, 2017 9:21:13 AM

Is there are high demand for Australian construction in the years ahead? What kinds of properties will home buyers, investors and businesses be looking for? In this post, we’ll take a close look at the factors impacting the Australian property market in 2018.

 

Economic Indicators

Key economic indicators can help us to make predictions about the coming years. According to the QBE Australian Housing Outlook 2017-2020, unemployment is predicted to stay at a healthy 5.7 per cent. This is good news for builders. When people have steady employment, they’re more likely to qualify for building and home loans.

Another important economic indicator is Gross Domestic Product (GDP). Over the past four years, Australia has recorded annual GDP around 2.5 per cent each year. While this is below the 3.6 per cent leading up to the Global Financial Crisis, mining exports have balanced out other economic challenges. Home construction has been a bright spot for the GDP as strong population growth and undersupply have increased demand.

Inflation has been minimal and will likely continue to be minimal in 2018 due to soft demand and intense competition. Employees are likely to seek higher wages, and businesses may respond by keeping costs down until the economy picks up.

 

Net Overseas Migration

With more and more people migrating to Australia from overseas, demand for housing and commercial properties will continue to rise. Over the past decade, New South Wales and Victoria have seen the largest influx. Together, these two areas account for 61 per cent of overseas migration. Queensland and Western Australian make up another 30 per cent. 


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A few parts of Australia, however, are expected to have lower net overseas migration. For example, migrants have travelled to Queensland, Western Australia and Northern Territory to work on mining projects that have now been completed. Without continued mining work, these migrants are returning home. Overall, however, migration is expected to bring nearly 200,000 new people to Australia over the next few years.

 

Lending and Interest Rates

Although it’s impossible to predict what interest rates will do in the coming year, some experts are predicting that the Reserve Bank will raise official rates in 2018. Australia’s cash rate has been at a record low of 1.5 per cent, but economists are saying that there is no longer a need for such “ultra-low” rates.

Increased regulatory requirements for lenders have influenced interest rates in recent years. Since 2014, APRA has increased its oversight, mandated the strengthening of bank balance sheets and instituted stricter lending guidelines. These factors have contained growth for investment lending. 

One of the biggest impacts of these regulations is that there’s more differentiation between loans for owner occupiers and investors. Investors are able to acquire loans with less money down, and interest-only loans (which are generally more attractive to investors than to owner occupiers) are becoming more common. Builders may find that they’ll be working with more investors than in the past given these changes.

 

Rise in First-Time Home Buyers

Starting in 2014, there was a decline in home sales to first-time buyers. Several factors contributed to this trend. First, house prices in some markets rose substantially in a very short period of time, making it difficult for people to save enough for the deposit on their loans. Second, wages were not rising commensurate with housing prices.

Recently, however, first home buyers have been stepping into the market once again. In the three months leading up to July 2017, sales for first home buyers were up by 13 per cent over the same period in 2016. If this trend continues, builders can expect to work with more of these buyers in 2018.

 

Infrastructure Projects

Across the country, governments have committed to significant infrastructure projects in 2018 and beyond. In fact, over $70 billion has been committed to transport infrastructure across Australia. Some of these projects have already begun, and some won’t be completed until 2020-2021. 

These infrastructure programs cover a wide range, including the Bruce Highway in Queensland, regional passenger rail in Victoria, the METRONET rail project in Western Australia and rail link to Tullamarine Airport.

Overall, it’s a good time for builders. With strong population growth and increased spending on infrastructure projects, communities are expanding. What will 2018 bring for your construction company? Get the latest construction software to stay on the cutting edge and take advantage of the positive outlook ahead.

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