Australia’s property market may have hit an uncharacteristic slow patch between 2017 and 2019, but five consecutive months of price growth confirm that values have resumed their long-term upward trajectory.
All indications are that now could be a great time to be investing in property in Australia, with capital city home values currently surging and forecast to keep climbing throughout 2020.
The brief lull that the traditionally strong residential property sector experienced between 2017 and 2019 is now well and truly over. In November, home prices recorded their biggest monthly jump since 2003, and CoreLogic’s latest national Home Value Index reveals that the 1.7% monthly increase was the fifth in a row since the market bottomed in June 2019.
While national dwelling values are still 4.1% below their 2017 peak, they have already bounced back by 4.7% from their lows and are predicted to hit new all-time highs within a year.
Australia’s two largest cities continue to lead the rapid recovery in national prices, with Sydney and Melbourne values up 2.7% and 2.2% respectively during November, but all other capital cities bar Darwin also saw values increase over the month.
In Brisbane, prices edged up a more moderate 0.8%. However, the Queensland capital has always enjoyed a much more stable and predictable property market than Sydney and Melbourne’s. While prices in Brisbane are only up 8.1% over the past five years compared to 22.2% in Sydney, Brisbane’s prices are currently only down 0.8% from their all-time highs, compared to Sydney’s 8% decline.
A confluence of several positive influences is behind Australia’s booming property market sentiment, including three interest rate reductions by the Reserve Bank of Australia in June, July and October of 2019, respectively.
As a result, several financial institutions are now offering home loans with variable and five-year fixed interest rates of less than 3% p.a., making mortgages easier for households to service than they have been in decades.
Other causes for optimism have been the Coalition’s May federal election victory, ending uncertainty around tax reform, and an easing of loan serviceability policy by the Australian Prudential Regulation Authority.
At the same time a shortage of housing stock in many markets coupled with pent-up demand and a ‘fear of missing out’ on relatively low prices, particularly among first-time buyers, is prompting high levels of buyer activity.
And these conditions are forecast to prevail across 2020, meaning property purchased now may show early signs of capital appreciation.
The 2020 edition of the annual Christopher’s Housing Boom and Bust Report by property market analysts SQM Research predicts Sydney and Melbourne will continue to experience accelerated price growth next year and will surpass their 2017 price peaks before 2021.
It notes that unlike Sydney and Melbourne, Brisbane still has a fair amount of housing stock to absorb, which is currently relieving pricing pressure. However, this will soon be absorbed, and SQM predicts accelerated price growth in 2021 after a year of moderate gains for South East Queensland in 2020.
Andrew Degn, principal of Brisbane’s Place Estate Agents, says certain sectors of the Brisbane property market are already seeing very strong growth, and an oversupply in the Queensland capital’s apartment market is counterbalanced by a shortage of housing stock, particularly in the inner-city suburbs.
“We’ve seen a steady increase in business since the (May federal) election and it’s been a great second half of the year for us,’’ says Andrew. “That’s been underpinned partly by ongoing inter-state migration into Queensland, and more recently we’ve been seeing quite an influx of Hong Kong buyers on the back of the unrest there.’’
Brisbane realtor Judy O’Dea of Ray White Paddington agrees that 2019 was a turning point for the national property market in general and for Brisbane in particular.
“There’s been a big turnaround in the big cities, and Brisbane, Sydney and Melbourne are all strong again,’’ says Judy. “We’re currently seeing auction clearance rates of 70%, which is unusually high for Brisbane, and 2020 is already looking very busy for our agency.
“Certainly, now is a good time to be investing in property in Brisbane.’’
Beyond that, Australia may follow other nations into the unchartered territory of negative interest.
Central banks in Australia and elsewhere are lowering rates or considering lowering rates, to less than zero percent.
With continued wonder about a recession and an official RBA cash rate of just 0.75%, policy makers have few other options in their artillery to stimulate investment and demand.
For more on the Australian property market, check out why the low cash rate is positive for commercial property investors or why alternative property investments, such as mortgage trusts are seeing increased demand from yield-focused investors.
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