Investment property in Sydney is at risk of crashing out of the market if the global economic recovery continues, according to a new property investment survey.
Key points:The survey found that investment property in Melbourne is expected to increase by 12.4 per cent in the next 12 months compared to a year agoThe average price of a detached house in Melbourne’s inner west is up by 10.3 per cent compared to the same period last yearSource: Property Investment Association surveyThe survey from Property Investment Alliance (PIA) shows that Melbourne’s median price is expected in the coming 12 months to rise by 12 per cent from $1.4 million to $2.5 million, or $500 million.
That would see the median price in Melbourne jump from $950,000 to $1 million, according the PIA.
But while Melbourne is the cheapest capital in the country for property, it has also been hit by the downturn in China.
The PIA said the housing market in Melbourne has been hit hard by the global recession and the slow recovery in China, and the result is that there is no growth in the property market.
“It is not surprising that Melbourne has seen a steep drop in property investment over the past year,” said PIA chief executive Tim Cripps.
“While it is true that the housing markets have been particularly hard hit, the real impact of this has been felt across the state and region, especially in Sydney.”
Property investment boomThe Pia survey of more than 2,500 Melbourne residents found that the average price for a detached home in the inner-west was up by $8,600 to $4,400.
That was a 4.6 per cent increase compared to last year.
The median price for detached houses in the central city increased by 6.6 percent, but only by 0.1 per cent over the same time period.
That compares to a 6.7 per cent rise in the median for detached homes in Melbourne in 2015.
It also saw the average house price increase by $1,200 to $3,800.
In Sydney, the median house price increased by $3.7 million to a record $2,817,000, while in Melbourne the median rose by $2 million to an all-time high of $4.7m.
In the inner suburbs, the average property price rose by 1.9 per cent to $873,000.
In Brisbane, the price of detached homes increased by 7.3 percent to $5.8 million, while Sydney saw a fall in price by 0,6 per to $6.2 million.
But in Melbourne, prices are expected to continue to increase over the next year.
“Our projections indicate that over the coming year prices in Melbourne will increase by a further 12 per.cent, which will push the median home price to $917,400 by the end of 2020, according our most recent property forecast,” said Mr Crippes.
“The average value of a residential property in the Melbourne inner city will continue to rise, and by 2021, this will reach a new record level of $1 billion.”
Mr Crippers said the property bubble is a long-term problem.
“We believe that there are a number of factors which contribute to the property investment boom in Melbourne,” he said.
“One of those is a lack of affordability and a lack or over-investment in housing, and that’s a concern for many families in Melbourne.”
“This will be particularly evident in the suburbs, where the median value of residential property will continue its decline over the course of the next few years.
He said a number the Pia surveyed are considering building more properties and more of them could be “bubble properties” that would grow at a higher rate than the rest of the city.