In the last few years across the real estate sector, we have seen a range of ups and downs. A three-year boom in the residential market has created opportunities for investment across the board, in all aspects of the property. With increases in residential, commercial, retail and industrial booms as well, with the need for expansion within fast-growing suburbs. So, what’s in store for 2019?
The residential boom looks like it could be over, with Australia predicted to see the world's most significant drop in property prices. Some experts are predicting that prices could drop anywhere between 5.0% and even as much as 10.0% (on top of the 7.0% already seen in recent months). An increase in housing supply and tighter mortgage rules are among the reasons for the drop.
New restrictions on Chinese investors as well as China’s decelerating economy are also having an impact.
For those buying investment property in the commercial sector in 2019, it will be survival of the fittest. Buying for high rental yields and capital gain was easy for the last few years, but now investors need to proceed with far more caution.
A low unemployment rate of 5.0% across Australia, as well as active job growth in the last year, has meant the commercial real estate sector has a lot of momentum.
Strong demand from commercial tenants and active investors are keeping the commercial property market afloat. Build to rent, although currently practically non-existent in Australia is a path that commercial property developers and owners are predicted to walk down. With office markets vacancy rates now at ten-year lows around the country, we will see flowthrough to rental growth, creating a stable future for owners and investors.
With frequent shifts in investor interest in retail property, the online shopping boom is now on flowing through the retail property sector occupancy rates like a flood. The way people buy in 2019 will dramatically affect retail real estate, particularly in shopping centres. Although there has been a structural shift in the way investors view shopping centres, there hasn’t been that much of an impact on yields.
The future of retail yields in shopping centres, however, is up in the air, with predictions that any shopping centre types that can’t adapt to changes will be impacted. Smaller standalone retail and strip centres are more likely to be suitable for investment based around booming retails suburbs.
The shifting retail landscape has been a positive influence on the industrial sector, and strong demand for industrial property remains in an upward spiral. Industrial growth in many areas of Brisbane are directly related to the housing boom of the last few years, with both outer suburbs and inner suburbs seeing growth.
One notable downshift in the last two years is, of course, development site sales. They began to decline in 2017 and are expected to decline in 2019 continually. Some of this can, of course, be attributed to restrictions set in place for Chinese investors, creating a much smaller list of offshore buyers ready and waiting.
The other key driver of the development site sales declines is a substantial weakening of Australian investor activity, (down 30% on the 2015 peak). Although there isn’t much to suggest that demand for development sites will increase in 2019, the weakening housing prices are bound to have some effect.
With Australia predicted to see the world's most significant drop in property prices, along with a substantial decline in residential investor activity in the last 18 months, investors in 2019 will be looking for the types of investment properties which have flexibility for personal use. They will seek property that can be occupied in the future, and to use for home share style platforms like Airbnb. Lifestyle investors will be driven by a focus on the property’s flexibility and reliance on longer-term capital gains instead of short-term yield.
Brisbane is predicted to lead the way among the capital cities, with 13% property price growth still predicted by 2021, contrary to expert opinions of late. With a steady flow of southerners seeing Queensland as a good investment prospect, Brisbane’s residential property market should continue to stay to course for the near future at least.