Christmas Eve and this is my last post for the year. Taking this opportunity and looking to 2016 what factors might we expect to influence residential markets, while this is really guess work territory, it’s always worth exploring some of the possible trends that might make an impression on our residential markets over the next 12 months.

As 2015 ends I think a key point is that that any sort of over inflated property bubble in the headlines for much of the year, was in reality avoided. The dooms-day rhetoric did not come to pass, and while some markets might be slowing, there was no bust, and we need to remember that markets will always move up and down. Still we often seam to have someone looking for a crash and in 2015 there were disappointed and I think that will again be the reality in 2016, as such a view is very simplistic.

While we are now seeing that very high, and in some areas double-digit house price increases are slowing this is in response to wider economic trends however continued low interest and shifting demographic trends will continue to drive demand.

 

A Complex Matrix

This year the end of the mining boom has proved to be a hurdle and there’s more adjustment still to come. We also need to adjust to the reality of climate change and that includes how will the economy cope with a re-shaping of the demand for coal, a big issue for NSW and Queensland in particular. Plus in Victoria & South Australia the end of car manufacturing will become a reality in 2016. So in combination will any of these factors lead to what might be our first recession in more than a quarter of a century, and could that in-turn deflate the residential property market?

I do not hold that view and I think there has already been a deliberate and well-managed policy shift that has helped to stabilise the market without any panic setting in and while the outlook is complex there’s still lots of opportunity for buyers and developers. So let’s look at some of the key ‘big-picture’ factors that I think most of us would agree will help influence the market, and it’s a fairly long list.

 

The Environment – Climate Change to Impact

However, heading the list I do think that the environment (climate change) is going to bite much more directly in 2016 as consumers and all sectors of the economy have to come to grips with the cold hard fact that the environment is going to change many industries, have a direct economic impact and influence consumer behaviour and that will unquestionably extend to the housing market.

Buyers will more than ever be looking for sensitive design solutions and housing estates and apartment projects will have to deliver energy efficiency, climate change will be a key driver of design, materials selection and go onto to influence most aspects of planning.

 

The Asian Connection to Grow

I also see our continued ties with Asia, and that’s not just with China, being a bigger influence, that engagement will extend well beyond direct buying of residential property by individuals to a much higher and more visible role via direct development investment.

Several Free Trade Agreements and strong tourism numbers are further strengthening our connections with Asia, however the positive outlook across most Asian economies is having a wider impact as consumer confidence among most of our neighbours improves, while locally consumer confidence still looks restrained. But this difference is positive, because as we look to sell more goods and services into Asia, strong consumer sentiment will drive demand for our Aussie exports, having happy neighbours is a good thing and benefits the market.

 

Delivering Infrastructure

Another very big factor in 2016 will be the long overdue delivery of infrastructure, and at last in many cities including Sydney, we are actually seeing some big projects being delivered, being built with activity on the ground. The very visible closure of parts of Sydney’s George Street for construction of the light rail is a very welcome example.

Infrastructure remains vital to the housing market, in Sydney the rail links in the south-west and north-west are helping to drive and sustain high levels of demand in these key growth areas. The inner-west has already benefitted from the light rail there. Now areas like Parramatta and Homebush are looking for stronger residential and commercial development and transport plans for areas like Waterloo are all connected to better infrastructure.

The Sydney CBD and East will benefit from the light rail and we should not forget the rise of Chatswood and other areas well connected to rail. The amalgamation of local councils across greater Sydney should also have a positive impact on the planning and delivery of infrastructure.

 

Key Demographics

Looking at some key demographic trends I think that the demands of older buyers, and late start families are going to be high on the list of potential buyers. Residential projects will need to better catered for and target these two groups.

As the lifestyle changes impacting the baby boomers accelerate and there is an intergeneration shift in the housing market, apartment designs will need to pick up on the particular demands of these groups, which can mean slightly larger apartments and different levels of facilities. Health issues are also tied up here, and locations close to medical facilities will also be sought after.

With late start families, we are also looking at larger apartments, with really strong transport connections and nearby schools. This shift has also been fuelled by the fact that more women now have a longer or later career focus, and are marrying later and couples are tending to be older.

 

Taxation Policy

Any view of the housing and property investment market in 2016 will be influenced by the ongoing taxation debate, hopefully with a Federal election due late in 2016 we will start to get actual policy in place. But this is an extensive topic that may well involve GST, superannuation, stamp duty and negative gearing and all of these topics will have a direct bearing on property.

Given that this is only a very short list of key topics the general outlook for 2016 is going to be heavily influenced by some big-ticket external factors, and the prospect of sweeping changes to budget and social policies may well set buyers thinking about their plans.

However carefully management of the economy, ensuring good employment growth and the almost assured continuation of low interest rates will act to reassure the market. There could also be some breathing space for first time buyers, and older change over buyers, spooked recently by rapidly rising prices, and finally I also see property regaining its investment appeal. Overall I think it’s an understatement to say that we have an interesting year ahead!