Highlights of REA Group Property Demand Index Report for December 2016:
National demand for property dropped by 6.6 percent on realestate.com.au in December, down from peak levels recorded in October and November.
Victoria had the largest decline over the month, as demands dip for both houses and apartments.
New South Wales (NSW) followed closely, possibly suggesting that the housing boom may be over.
Tasmania, NSW and Victoria continue to see the highest levels of demand in Australia with Western Australia and Northern Territory struggling to keep up.
Sydney and Melbourne’s robust property market may see a slight dip this year, the December Property Demand Index Report by the REA Group has predicted.
The REA Group predicts that both of these stronghold markets are expected to have a subdued year, based on trends seen on realestate.com.au.
REA Group Chief Economist Nerida Conisbee in a media release on Thursday said the key reasons for the decline was 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.
“Demand for property on realestate.com.au skyrocketed in 2016, with the REA Group Property Demand Index increasing by 16.2 percent across the year,” Conisbee said.
“After peaking in October and November, demand for property dropped slightly to close out 2016, with the index falling 6.6 percent nationally in December,” she said.
Conisbee said despite the RBA indicating that it may still cut the cash rate further, many Australian banks have “sent out strong signals” that they will not pass the cuts onto borrowers and expects interest rate rise by banks to remain.
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“This will be a key issue for borrowers this year, especially first home buyers and investors, with access to cheap money becoming more difficult, ” she said.
Meanwhile, she said NSW and Victoria recorded the largest drop in demand in December, while Tasmania continued to show elevated levels of interest and has now become the strongest property market throughout Australia.
Conisbee said continued concerns about apartment oversupply were starting to creep in with demands for such housing dropping by more than 7 percent in both NSW and Victoria.
“Western Australia and Northern Territory remain the lowest in-demand markets on realestate.com.au however, demand was relatively stable with both states recording an increase in apartment demands,” she said.