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While the residential property market is unlikely to weaken in 2016, property price declines could be on the horizon in 2017, with the market now responding to APRA’s regulatory guidelines, according to one economist.
Speaking at BIS Shrapnel’s annual media lunch last week, managing director Robert Mellor said evidence is surfacing to suggest that investors and lenders involved in the property market – particularly in Sydney – are beginning to respond to APRA’s directions regarding interest rates and LVRs.
Mr Mellor said it will be “interesting” to see how investors buying off the plan will respond when property price growth begins to edge back toward two or three per cent.
“Will they buy off the plan? Will they be paying inflated prices? Because there will be inflated prices for off the plan [compared] to established property,” he said.
“At that point, you could get a bigger correction in the market simply because investors leave the market for new property.”
Investors looking at properties going for $1 million to $1.4 million in the middle-distance suburbs may think they are seeing unaffordable prices, Mr Mellor noted.
“If there’s not a correction, we’re in for a period of fairly modest price growth over the next five years,” he said.
[Related: Property headwinds on the horizon]
