The big property story of 2017 has been the skyrocketing growth of property values in Sydney and Melbourne. According to John McGrath, Founder & Executive Director, McGrath Estate Agents, Sydney and Melbourne have pretty much “decoupled” from the rest of the country and created their own marketplaces.

McGrath likens the two cities to the “New York’s” of Australia, having recorded phenomenal price growth over the past five years. In fact, Sydney and Melbourne have seen house prices rise 66.9% and 39.8% respectively since the latest growth cycle kicked off mid-2012. That’s seen the median house price in Sydney skyrocket to $960,000, adding an additional $385,000 to home equity in just five years. In Melbourne, home owners have pocketed value gains of about $192,500 over the same five year period, with the city’s median price sitting at $675,000.

Within the two cities some suburbs have eclipsed even these stellar growth rates. Over the five years to June 2017, the biggest winners were Bringelly (170.1% growth) and Kemps Creek (166%) in Sydney’s western growth corridor, and Clareville (125%) on the northern beaches. Melbourne’s biggest boom winners were Huntingdale (103% growth), Ashwood (91.2%) and Ashburton (90.6%) in the south east.

Nonetheless, McGrath believes the value gap between Sydney and Melbourne and the rest of the country is too wide and is likely to close somewhat over the next few years. Not that he’s expecting prices to tumble any time soon. It’s more likely that other cities will play catch up, and while McGrath expects Sydney and Melbourne markets will take a breather, he is “certain there is no bubble about to burst.”

Angus Raine, executive chairman of the Raine & Horne group, agrees, saying, “Sydney and Melbourne have the strength of numbers in terms of current population and attracting future migrants, and are backed by strong economies. It’s hard to see either of these markets experiencing more than a temporary blip on a long term price growth trajectory.”

Hobart forges ahead

The quiet achiever of 2017 was Hobart, where prices climbed 11.5% over the year. McGrath believes the greater affordability of the Tassie capital, where the median home price is a budget-friendly $398,393, is driving a lot of these price gains. He notes, “Hobart continues to attract sea changers especially retirees, and the city has good medium term prospects.”

Angus Raine says a lot of the interest in Hobart is coming from interstate investors. “The rental market in Hobart is very tight, and investment properties are commanding rental yields of 5.0% – that’s far higher than the 2.6% or 2.9% you’re likely to earn on a Melbourne or Sydney property respectively. When you add in Hobart’s affordability there’s plenty of appeal for investors. But for sheer value and a laid back lifestyle, it’s also a great spot for homebuyers on a budget and this is likely to continue in 2018.”

Queensland set to shine through

Looking ahead, South East Queensland is likely to be “one of the best property markets over the next few years” according to McGrath. From the Sunshine Coast down to the Gold Coast and across to Toowoomba, he says these areas have seen some growth to date with “more to come.” Raine also sees a lot of upside to South East Queensland. “The 2018 Commonwealth Games will really put this area back on the map, and to the west, Toowoomba is benefitting from major infrastructure developments that are improving road and air links. It’s a region with plenty of growth potential.”

Perth ready for an upswing

Perth may have had a tough run with values falling 2.6% over the last 12 months. However, Tim Lawless, Head of Research at CoreLogic, believes there is mounting evidence that the Perth housing market may have bottomed out – the city having recorded its first quarterly price gain of 0.3% since 2014. Angus Raine also believes that “the worst appears to be behind Perth’s residential market.”

McGrath notes, “Perth is still a good market to invest in. It’s a big city and having weathered the slowing of the resource boom it’s now back to business as usual.” With values at a potential low point, Perth holds another trump card. McGrath says, “The city is well positioned to be a recipient of migration from Asian countries.”

2018: A good year to achieve your property goals

Angus Raine sums up the outlook for 2018 and the next growth cycle saying, “Without signs of strong wages growth, interest rates look like staying low for a while yet, and that’s great news for first home buyers and upgraders. If a property ticks all the boxes for what you need in a home, the location is right, and your budget can handle a home loan, this could be the year to kick your property goals.”

To make the most of today’s property market – either as a home buyer or investor, set a date to meet with your Aussie Broker.