This time last year, the market was beginning to change.

The Royal Commission was just about to be announced and the Sydney market was just starting to show some signs of weakness.
Developer activity was moderating and investors were pulling back.
It’s been no surprise then that in 2018, many of Australia’s property markets experienced some significant shifts.

The Royal Commission has made borrowing difficult.

The Financial Services Royal Commission was announced on 30 November 2017 and banks began adjusting their lending practices almost immediately.
In 2018, anyone looking to get a loan has found it increasingly difficult and we saw a marked reduction in lending to all buyers.
But, it was investors that staged the biggest pull back. By the end of 2018, lending to investors has dropped by almost 30% from the peak.
We’ll know the final outcome of the Royal Commission in early 2019, at which stage we’ll get a better idea as to what the likely.

Prices fell in Sydney and Melbourne

Sydney prices peaked in July 2017 while Melbourne’s pricing reached a high at the end of 2017. Both cities experienced price declines in 2018
While we started to see buyer activity pull back on realestate.com.au at the end of 2017, this accelerated far quicker than expected – likely due to extensive reporting of the potential of a price crash.
At this stage, it looks like prices will continue to drop next year until there is greater certainty as to the impact of the Royal Commission, and when the 2019 Federal election has been decided.
We saw the end of high auction numbers and clearance rates
The biggest Super Saturday ever recorded was in Melbourne at the end of October 2017, when almost 2,000 properties went to auction. This coincided almost exactly with prices peaking in the city.
Clearance rates in 2018 were a lot lower than they were the previous year. At the same time fewer people are now going to auction and more people are moving to private sale.
Will clearance rates get to below 40%? There has been only one weekend where clearance rates got that low and that was in Sydney at the peak of the Global Financial Crisis.
With very few places going to auction, agents adapted quickly and the next weekend, the clearance rate jumped back up to 50% as fewer properties were sold by the auction method.

First home buyers are back

Pretty much everywhere, first home buyers staged a recovery, with Sydney showing the biggest resurgence.
Part of this was to do with improved first home buyer incentives in many states. However, the other driver was that there were fewer investors.
Investors and first home buyers frequently target similar properties in similar locations, so more limited competition was good news for this buyer group.
First home buyers were also encouraged by the slower market in many cities, giving them time to make decisions without the pressure of fast rising prices.

Hobart just kept growing

Hobart has been seeing rising buyer activity on realestate.com.au since 2015 and in 2018 this continued. With a lot of buyer activity comes price growth, and Hobart was the strongest capital city in 2018. The strength of Hobart also spread to other parts of Tasmania with Launceston seeing double-digit price growth over the year. With more stringent lending conditions, and a pull back of rental activity, it is unlikely that we will continue to see very strong price growth in Hobart next year.

Developer activity continued to moderate

Developers in Australia have been buoyed by lots of local and offshore investors over the past few years. However, both groups have steadily declined, which led to fewer buyers and therefore less development. The impact also flowed through to development site sales, which also reduced in volume. While investors pulled back, there was a strong increase in the number of first home buyers looking to buy new apartments. House and land developments also continue to hold up a lot better.