A year ago, the experts predicted that Sydney house price growth would subside. It did. But not without a final surge to a mid-year crescendo.
At the same time, many pundits warned that commercial values could not keep rising. They were utterly wrong. Lower for longer won out. At least so far.
And who would have predicted that Australia would have a Minister for Cities and a new all-government enthusiasm for urban renewal.
December forecasts can have the longevity of wrapping paper. But here goes.
Rail-loving Prime Minister Malcolm Turnbull has brought a new enthusiasm for city building. Photo: Supplied
At the simplest level, property in 2016 will move with the money, as it did in 2015.
Housing cooled as the banks reined in investor lending with macro-prudential controls and an out of cycle rate rise.
Some pundits are already predicting that the impact of those changes may pass in 2016, holding the demand at current levels.
But for commercial property, particularly development, the market is yet to respond to changed lending.
Banks are tightening, particularly for untried customers. Some Asian banks are following suit and the private lenders will not fill the gap.
At the same time the price of sites has jumped, construction costs have risen, particularly for all the imported building inputs, and the end value of apartments has stabilised. As funding tightens, many of those mooted apartments will simply not proceed.
Commercial property investment, particularly for well leased investments in NSW and Victoria soared in 2015. At the big end of town China Investment Corporation spent $2.5 billion on the Investa Office towers. At the other end, mum and dad and SMSF investors spent over $1 billion on shops and offices and childcare centres at auctions run by just one agency, Burgess Rawson.
A year ago, the consensus was that the Real Estate Investment Trusts would deliver total returns of around 9-10 per cent. On Wednesday, after the REITS soared further in the first quarter of the year, and ahead of the Federal Reserve decision, that looked too conservative.
The Federal Reserve decision, particularly the second move to raise rates, will change some of those imperatives. The US REITS have been hammered ahead of the increase in rates.
But remember that in many past cycles of rate tightening, the REITs have gained ground as the economic fundamentals improve to boost rents and income. At the moment, that is exactly what is happening in the office towers and shopping centres of Sydney, and to a lesser extent Melbourne, but absolutely not in Perth.
Beyond the financials, I sense a change of mood. “We’re on the cusp of change; the old ways of doing things are not going to work for us,” says James Fitzpatrick, leader of design firm Fitzpatrick + Partners.
The big themes of 2016 could well emerge as pre-fabrication, healthy buildings and cities, and affordable and social housing.
Thanks for all your support and good will during the year. Enjoy the break.