OK, so with 2016 pretty much in the bank, now is a great time to get out the crystal ball and look ahead to what we are likely to experience in 2017!
Looking back at the big changes over 2016, it would be best described as both a year of volatility and one where we have learnt to perhaps expect the unexpected.
We started the year with the worst two-week stretch to start a year…ever! We saw the broad-based S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite down 8%, 8.3%, and 10.4%, respectively. Of course towards the end of this year the U.S voted in an unlikely president in the form of Donald Trump and markets saw the US stock market soar to new record heights. Go figure right???
In the first quarter of 2016, oil prices hit 12-year lows with West Texas Intermediate hitting $27 per barrel, and natural gas hitting 17-year lows of $1.60s per million BTUs.
In contrast, in the last quarter of 2016, coking coal has risen by over 300% throughout the year.
The Bank of Japan stunned the world by selling 10-year government bonds with a negative interest rate for the first time ever. And in the UK, the leave camp where victorious resulting in a Brexit some never saw coming
And closer to home, the R.B.A has cut interest rates to historic lows, and property prices in Sydney & Melbourne have continued to surge ahead with auction clearance rates still holding above 75%.
In April, 2016 the NAB forecast that house prices would rise by 1.5 per cent in Sydney, and 2.3 per cent in Melbourne during 2016.
However, they underestimated the demand for quality Australian residential property, forcing them to revise their forecast upwards in July, 2016 to a predicted house price growth of 8.6 per cent for Sydney and 6.1 per cent in Melbourne.
Then in November 2016, the NAB have again come out and called for very weak growth in 2017 with house prices nationally expected to rise by just at 0.4 per cent, and unit prices dropping by 1.6 per cent in 2017. NAB Chief Economist Mr. Alan Oster was reported as saying “that despite those soft figures property prices were unlikely to experience a severe “correction’’.”
In the same week, property researcher Luis Christopher from SQMResearch, released his annual property outlook report for 2017 which predicts price growth over 2017 of between 11 and 16 per cent in Sydney and 10 to 15 per cent in Melbourne. “What we have noticed in very recent weeks is an acceleration, particularly in the Sydney housing market. Our view is that this acceleration will continue, it will go well into 2017.” Mr Christopher said. However, Mr. Christopher also believes that this level of growth is unsustainable and could lead to a hard landing in 2018 if the Reserve Bank of Australia does not lift interest rates &/or if the Australian Prudential Regulation Authority (APRA) does not clamp down harder on home lending.
In the QBE published “Australian Housing Outlook 2016 – 2019” the forecast is for most cities house price growth to be below the rate of inflation, and for the price growth of all capital city dwellings (houses and units) to be negative with the exceptions of Canberra & Hobart for the period to end of financial year 2018/19.
And of course perennial doomsday prophet, economist Professor Steve Keen, has again claimed that there will be an Australian Recession in 2017 and real estate prices will decline by 40% to 70%.
The problem is, they can’t all be right. We can’t see a crash of up to 70%, low growth, or growth of up to 16% p.a so who can you really trust?