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Property demand decline expected in 2017

Property demand decline expected in 2017

Demand for property is expected to decline in 2017 due to Australian banks increasing their interest rates to buyers late last year.

This is according to the REA Group Property Demand Index which revealed that demand for property on realestate.com.au increased 16.2% across the year in 2016.

However, after peaking in October and November, demand for property dropped to close out 2016, with the index falling 6.6% nationally in December.

The States with the largest declines were New South Wales and Victoria, with demand for apartments dropping by more than 7% in both.

REA Group Chief Economist, Nerida Conisbee, said: “While still early into the new year, the easing of demand nationally suggests that the record price rises we saw in Sydney and Melbourne last year are likely to be more subdued as we move further into 2017.

“The key drivers of this demand decline are likely due to Australian banks increasing interest rates for buyers independently of the Reserve Bank of Australia (RBA) in late November and early December and continuing affordability issues across the Eastern seaboard.

“Given the RBA has indicated that it may still cut the cash rate further, the banks have sent strong signals that they will respond by not passing cuts onto borrowers and we expect out of cycle interest rate rises by banks to continue.

“This will be a key issue for borrowers this year, especially first home buyers and investors, with access to cheap money becoming more difficult.”

The report also revealed:

  • New South Wales and Victoria saw the largest decrease in people looking to buy on realestate.com.au in December. Affordability remains the key driver in both states
  • New South Wales, Tasmania and Victoria continue to see the highest level of demand for houses
  • Apartment demand dropped by 5% nationally in the month to December, performing marginally better than houses over the same time period
  • Demand for apartments nationally on realestate.com.au remains high, the third highest point recorded
  • Concerns of apartment over-supply are impacting demand in New South Wales and Victoria, with these states experiencing the largest declines in December 2016.


Source: REINSW, published 10 Feb 2017