What Can The Off The Plan Market Expect In 2016 & Beyond?

What can we actually expect this year?

2015 was a remarkable year for Australia’s off the plan market; and with thousands of off the plan apartments purchased in 2015, many are now turning their heads for 2016. 

With a strong interest from foreign investors, specifically Chinese investment, Australia’s East-Coast, Melbourne, Sydney and Brisbane, are sure to continue a flourishing upward trend. 

China is now Australia’s leading foreign investor nation, as they had a whopping $12.4bn approved splurge on Australian real estate over the past financial year. This is a 60% increase on Chinese spending in Australia, and they occupy 15% of the national housing supply to date.

“Purchases are concentrated in Sydney and Melbourne where Chinese demand is the equivalent of 23 per cent and 20 per cent of new supply, respectively,” Mr Tevfik said.

“While new foreign investment proposals may make Australian real estate less attractive for Chinese buyers, we believe the potential erosion of demand will be marginal.

“After all, Australia is on the doorstep of the greatest wealth creation in three centuries. Despite moderating growth, we expect more Chinese wealth to be invested abroad.”

It is believed that Australian housing-related stocks, which includes developers, building material companies and property websites will experience massive booms.

“Without a structural increase in supply to match the structural increase in Chinese demand, there will unfortunately be strong property price inflation for many years to come.”

The latest Victorian foreign investment tax changes are believed to make Sydney prices sky-rocket.

“We imagine the potential increase in fees to buy a Melbourne property would drive the marginal buyer to other Australian cities like Sydney where charges are lower…a tax in Victoria could make Sydney house prices even more expensive,” Mr Tevfik concluded.

Andrew Leoncelli, Managing Director of CBRE Melbourne, believes that Australia’s stable conditions provide a platform that is reliable for both investors here and abroad.

“Whilst the broader macro market continues to provide stable conditions for investment sales, CBRE Residential are confident of continued strong results.”

“Population growth levels remain high, as Melbourne continues to attract people from all over Australia and from all other states as a great place to live. Interest rates are at a historically low level and even if we were to get some form of increase over this calendar year it wouldn't deter even the most sophisticated of investors that there is long term value buying in Melbourne.”

Leonard Teplin, a director of Marshall White Projects, expects a prosperous year for Melbourne's property market.

"Overall we expect the empty nester market to continue to be active with professional singles and double income no kid house holds."

"We believe purchases with good savings will continue to be active in the market, particularly home owners. However, buyers with small deposits may find it difficult to get finance."

"Townhouses, or house and land packages as the market recognises them, continue to do well at all price points."

"The local market relished the opportunity presented by “Highbury” in Glamis Road, Footscray West, which saw 46 townhouses sold in 40 days at an average price point of $635,000. “Palamon” at 12 Dudley Pde Canterbury, has been embraced by six active down-sizers, with an average sale price in excess of $2,000,000."

"Many boutique projects are launching today with either minimal (3- 5% in total) or no one-bedroom apartments. Those that are created are optionally 45-50m2 internally to a price sensitive sector of the market, where often an additional $10,000 to $15,000 is deemed too much by these buyers."

Predictably, quality locations continue to attract significant premiums in the current market, with pressure from offshore buyers continuing unabated despite the ‘sabre-rattling’ from both the state and federal governments.

"The good news is that these premiums can passed on to the end-user with the coveted target market of a empty-nester selling their own home and then accepting that an extra 5 to 10% in their purchase price will be palatable if the development looks and feels the part. Despite relying almost exclusively on down-sizing purchasers, projects such as “High & Spring” at 1271-1273 High Street, Malvern and “Lincoln “at 15-17 Cromwell Road, South Yarra have sold out in weeks, in contrast to the months previously forecast. "

As new parts of Australia's market begins to heat up, specifically Brisbane, combined with sharp interest from foreign investors, 2016 should be equally as prosperous and exciting as the year's past.