We enter 2019 after a year that saw the housing and property market cool, particularly in Sydney and Melbourne and the Reserve Bank of Australia (RBA) left interest rates at 1.50 per cent.
What happened to the housing and property market in 2018?
Sydney, Melbourne, Perth and Darwin all saw property prices drop in the 12 months to 31 October 2018, while Brisbane, Adelaide, Canberra and Hobart saw price increases.
What could happen in 2019?
The year ahead brings a range of factors, both positive and negative, that could affect house prices and the property market.
Firstly, will the RBA raise interest rates? Most experts think not, at least for the first half of the year. A rate cut would support the housing market, raising prices or reducing falls by a few per cent.
Secondly, will Labor win the General Election in May? If they do they’ve promised negative gearing repeal and capital gain tax concession reductions, big tax changes that would likely reduce house prices by a few per cent.
If the Liberal’s stay in power, experts suggest it would support house prices, again by a few per cent.
Other factors affecting the property market in 2019 include:
- US trade policies and tariffs have a negative effect on global economy, including Australia;
- The booming US economy is sucking liquidity out of global commodities, affecting interbank rates and the cost of borrowing;
- Counterbalancing this, the Australian Prudential Regulatory Authority’s (APRA) lifting the lending cap on interest-only loans should stimulate the market;
- Negative equity for recent first-home buyers is putting downward pressure on house prices;
- But accelerated price falls in big cities like Sydney and Melbourne could lower loan-to-value ratios (LVR), helping first-home buyers.
With these additional market factors in mind, Christopher’s Housing Boom and Bust report discusses a number of predictions for capital cities across Australia in 2019.
Capital cities trending positive
Hobart property prices are forecast to continue rising in 2019 by between five and nine per cent. A booming Tasmanian economy should help the local housing market and with few rental properties vacant, the rental market will also grow.
Canberra house prices are expected to rise by between two and six per cent, similar to 2018. Last year the rental market in Canberra grew, helped by low vacancy rates causing rent increases of 7.7 per cent and raising house prices.
Adelaide 2019 price changes are predicted to be in the range of -1 to +2 per cent. Adelaide house prices have not fallen like other capital cities because the market has been steady, up 10 per cent over 10 years, possibly due to less investors driving prices.
Brisbane could see a change of -2 to +2 per cent. Low stock levels, falling vacancy rates, dwindling completions and higher job vacancies suggest price rises but this may be restrained by a reduction in availability of lending.
Perth prices are expected to see changes between -1 per cent to + three per cent. House prices are down from their peak by nine per cent over five years but with recession over and house prices back to fair value, it’s a buyers’ market. Perth’s links to iron and steel industries mean an economic risk by an extended trade war between the US and China.
Capital cities expected to decline
Sydney’s large falls in 2018 are expected to continue in 2019, by two to 10 per cent depending on Election results. Sydney was always going to be vulnerable in a downturn with property overpriced, a reduction in interest-only lending and no interest rate cut. Many factors will influence whether the market reaches the bottom by the end of 2019.
Darwin sees a forecast for prices to fall between -4 and -8 per cent in 2019, slightly higher than 2018. Rental prices have dropped by 38 per cent, peak to trough and house prices have fallen by half that suggest there will be opportunities for buyers in coming years.
Melbourne prices could fall by between two and 10 per cent in 2019. House prices are affected by high vacancies and less buyers and a market correction following an overpriced market. The correction is behind Sydney’s, so prices could fall further before they begin to recover.
While the media and chatter around the property market in 2019 has overall been quite grim, Christopher’s Housing Boom and Bust report supports that opportunities exist for savvy investors in a ‘slowing’ property market.
If you’re looking to make the most of the current housing and property market conditions, consider if investment in property via a Trust of direct ownership is right for you.
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