Are cracks starting to appear in Australia’s property market?

 

Deteriorating prices and rising vacancy rates across Australia suggests that the nation’s property market could finally be running out of steam.

Rising supply and poor investor demand is expected to affect price direction over the next three years.

A combination of lower population growth and increased dwelling completions will see most undersupplied markets tip into oversupply in 2016 and 2017, while excess stock in other markets is likely to persist, according to a recent BIS Shrapnel report.

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At the same time, recent figures released by SQM Research revealed the national vacancy rate was recorded at a whopping 2.5% over June, a 0.1% increase from May.

In fact it was the Perth property market which largely contributed to the national increase, where challenging conditions raised the vacancy rate 0.3% month-on-month to 5% – the highest on record.

The climbing vacancy rate is having a serious impact on the city’s rental market and causing rates to fall rapidly.

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Is this the beginning of what could be a significant property price slide?

Combined with the anticipated oversupply of dwellings following a property construction boom, all states are expected to face extreme price pressure in the next couple of years.

BIS Shrapnel expects all markets to steadily weaken and bottom out over 2017/18 and 2018/19, with house prices largely flat or in decline over this period.