Source: Toby Giordano from ACF
If you’re considering real estate in 2015, the outlook is certainly looking great. Experts say our current low interest rates may be cut even further in the coming months – making the property market a particularly attractive investment right now.
Leading economists are predicting rates could fall three times, or by as much as 75 basis points, next year if unemployment rises and the economy continues to decline. Domain Group senior economist Dr Andrew Wilson said cutting interest rates could occur as early as February.
The sizzling Sydney market grabbed all the headlines in the past 12 months, yet other kinds of property investment around the country have also proven lucrative this year.
The latest figures from CoreLogic RP Data’s daily home value index show the average growth in home values across the major capital cities was 8.4 per cent year-on-year, led by Sydney’s 12.7 per cent growth and Melbourne’s 7.8 per cent rise.
Growth in Brisbane and the Gold Coast (5.3 per cent), Adelaide (4.7 per cent) and Perth (1.4 per cent) has been more subdued, but no residential markets matched the 23 per cent growth in sharemarket-listed property trusts.
Here’s a round up of what the experts are expecting in the year ahead from residential property and property trusts:
- SQM Research managing director Louis Christopher said he expected 2015 to be another positive year for residential property owners. “Basically the money markets think it’s a dead certainty rates are going to be cut by April 2015, with the chances increasing of another rate cut in June,” he said. “If such rates cuts happen, housing markets will be boosted throughout the course of the calendar year.”
- Real Estate Institute of Australia CEO Amanda Lynch said continuing low interest rates and the possibility of a cut should stimulate activity in the housing market.
- CommSec chief economist Craig James said the supply of new housing was starting to rise, which would lead to softer price growth, but a major slump was unlikely. “Sydney home prices have just been playing catch-up. Over the last decade Sydney home prices have risen by just 3.6 per cent on average per year, the second lowest of the capital cities,” he said.
- CoreLogic RP Data head of research Tim Lawless said he expected Sydney and Melbourne’s strong growth to soften in 2015, Brisbane property prices to outperform the other capitals, modest growth in Adelaide and Hobart, and a potential fall in Perth home values.
- A report by Colliers International said commercial property investment accelerated in 2014, and 2015 would be more of the same with improving demand from tenants. “The majority of sales are now to Australian investors. This is not surprising given that Australian investors are now recognised as the most confident in the world,” said John Kenny, Colliers International’s chief executive for Australia & New Zealand.
- AMP Capital forecasts investment returns in 2015 of about 9 per cent for Australian property trusts, the same as its forecast for Aussie shares but better than estimates for residential property (6 per cent) and cash (2.3 per cent).
- Research group Morningstar says low interest rates mean downside risk to property prices in 2015 is unlikely.
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