It’s been a rough couple of years for the Australian property market. Sydney’s average property value plummeted by 15% from its high point in 2017, while Melbourne’s decreased by around 10%. Perth and Darwin were even worse, falling by 20% and 30% respectively.
After two years of declining prices, signs are emerging that 2020 might just be the year the Australian property market turns around.
MODEST PRICE INCREASES HAVE ALREADY BEGUN
During August of this year, the average property price in many major cities stopped falling and started gradually increasing, according to CoreLogic:
- Sydney +1.6%
- Melbourne +1.4%
- Brisbane +0.2%
- Adelaide -0.2%
- Perth -0.5%
- Darwin -1.2%
- Hobart +0.5%
- Canberra +0.8%
- National +0.8%
This was the third month of increase in a row for both Sydney and Melbourne, and the second in Brisbane. The rate of decrease also slowed down in smaller markets such as Adelaide and Perth.
PROPERTY IS SELLING AGAIN
The Labour Party’s promises to overhaul negative gearing and capital gains tax cast a cloud of uncertainty over the property market earlier in the year. This may have helped contribute to its sluggishness, giving investors and sellers a reason to second guess their decisions. When the Liberal National Coalition was elected, that quickly dissipated.
Shortly after the election win in May, auction clearance rates in Sydney hit 80%, up from lows of 40%. Several months later, during the third week of September, houses are still selling well at auction in most major cities – particularly Melbourne which has a clearance rate of 77.8%.
MORE AFFORDABLE, OBTAINABLE LENDING
In July the Reserve Bank dropped the cash rate to 1%, which is a record low. Following that, banks have passed some of the savings onto consumers, which has made owning property cheaper for many.
Shortly prior to that, the Australian Prudential Regulatory Authority loosened lending restrictions, making it easier to secure a home loan. These two factors have stimulated buyer activity, putting upward pressure on prices.
After a few strong months, confidence is returning to property markets around Australia – particularly in Sydney and Melbourne. Property is worth whatever a buyer will pay for it and confident buyers tend to pay more, so this could help sustain the market’s price recovery.
While many of the signs point towards another property boom, a slow economy and stagnating wage growth may put the brakes on the market. With that said, most leading experts forecast a modest increase in property prices and buyer demand from now until 2021.