Demand for Victorian property slows in December after strong year

Scott Carbines,Herald Sun

DEMAND for Victorian property skyrocketed in 2016 amid tighter stock levels than the year prior but a new report claims the housing boom could be slowing down.

REA Group’s latest Property Demand Index shows a 23.2 per cent surge in demand for Victorian property year-on-year to December 31 — outpacing the nation’s 16.2 per cent rise.

However, an 8.6 per cent drop was recorded in the state for the final month of 2016.

Decreased demand was recorded in all states in December but Victoria’s was the largest and compares with the Australian average of 6.6 per cent.

REA Group Chief Economist Nerida Conisbee said this could mean a slower rate of price growth for Victorian property in 2017.

“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,” she said.

“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 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 shows demand for Victorian houses grew 28 per cent last year and dropped 8.2 per cent in the final month.

Demand for units rose 16.1 per cent over the year and decreased 7 per cent over the final month.

National Property Buyers senior buyers’ advocate Antony Buccello​ said he expected demand to remain strong in Melbourne in early 2017 but growth would slow.

“​It will be much of the same in the first quarter of next year, picking up where we left off from December,” he said.

“From late January, early February, everything will start happening again. There will be more competition out there, fighting for less property. ​​I’m tipping demand will keep on outstripping supply.

“Once people start to see demand is healthy, stock will start coming on in the second quarter. Stock​ ​levels will definitely improve, but I still think we’re going to fall short of demand.

​”I’m not expecting as big a growth year as this year — it will start off strong and stabilise.”

— with Samantha Landy