The year of 2019 was an unexpectedly solid year for the pessimists on the Australian Property Market. Although wages and household income are still low and housing affordability is once again worsening, the year of 2019 represented a great recovery for the Australian Market.
What happened in the real estate market during 2019?
– The Australian Market is now five months into an unexpected period of recovery.
– The Reserve Bank of Australia cut rates three times since June, causing house prices to rise in Sydney and Melbourne at the fastest growth rate we’ve seen in 10 years.
– Wages and household income remains low and housing affordability is once again worsening.
– Interest rates are low as they were in 1950’s, which is one of the main factors supporting market activity.
– The National Property Market index went up 1.7% in November of 2019.
– The largest month to month gain since 2003 – Positive annual growth since April 2018
– Melbourne housing values in December are 2.2% higher than November, 8,3% higher than May when it bottomed out.
– Rents are just 0.4% higher than they were last 12 months.
Source: Core Logic
Some of the factors contributing for the growth of the property market
– The synergy of a 75 basis points rate cut from the Reserve Bank.
– A loosening in loan serviceability policy from APRA.
– The removal of uncertainty around taxation reform following the federal election.
– Stock levels are persistently low which creates a sense of urgency in the market as buyers demand pick up.
– There’s a prospect that interest rates will fall further over the next month.
Looking to buy a property in 2020? What does this mean for you?
After the strong growth in the last 5 to 6 months, there is an increased possibility that the market will flatten during 2020.
However, a new First Home Owners Scheme, that commenced in January 2020, could influence the property prices in the affordable price bracket bellow 600k. This will stimulate first home owners to get into the market quicker with only 5% deposit avoiding LMI (Lenders Mortgage Insurance), creating more competition early this year for that bracket
Although, this scheme is limited to 10,000 grants each financial year for the whole of Australia, representing 10% of the annual transactions, it will definitely impact prices in some parts of Australia.
For more information about the 2020 scheme visit: https://www.nhfic.gov.au/what-we-do/fhlds/
Be mindful that this schemes are meant to stimulate the Australia economy, doesn’t mean that this is what you need for your next investment! Getting in the market with only 5% deposit even with no LMI, means paying more interest overtime!
As the new year starts we are likely to observe an increased stock in the market, as vendors try to lock in the gains from the last unexpected wave of late 2019. In addition with the indication that prices will still rise at the beginning of 2020.
As for the 2020 buyers, you should not feel you have missed out on this last market move, as Warren Buffet said there is always the next train, and optimistically there will be again in 2020.
Most importantly, when getting into the property market in 2020, think about which investment strategy you are going to apply.
Investing in property is not as easy as gambling, where we make our bets and hope for the best. It requires tons of research to find locations and properties with good value, getting the right property at a fair price and having an exit strategy for your investment. It is crucial that you do your due diligence and and seek advice if needed.
If you are looking to buy a property in 2020, and you feel unsure on when, how and where you should buy, book a free consultation with us!