The Australian housing market has hit its lowest in 12 years. While the economy did pretty well in 2018, the headwinds that came about in the latter part of the year suggested that economic growth for 2019 will be lower. The implication is that the slowdown in housing construction will greatly affect all other areas of real estate like the retail and office sectors. Homeowners held off on selling their properties making this year the one with the least listings in the past 12 years.
In these turn of events, people are now wondering when will it be a good time to invest in real estate in Truganina or Adelaide. Let’s take a glimpse of the condition of Australian real estate and what 2020 holds.
The Australian Housing Market: 2019 Overview
Following six years of solid rising house prices, the industry is facing one enormous stump. This was brought about by the introduction of market-cooling measures such as imposing higher taxes on foreign housing market investments and stricter lending conditions.
The Australian Bureau of Statistics (ABS) shows the prices of residential properties fell by 7.7% in eight major cities during the first quarter of the year. Dwelling approvals dropped by 22.2% in the first six months of 2019. Both home demand and supply have significantly dropped. The country’s slowing economy is not much help either. At just a 1.8% expansion at the start of the year, the Reserve Bank of Australia (RBA) predicted a lower 2.5% forecast compared to its initial 2.7% prediction. At this rate, the probability of house prices going up 20% looks far off.
On the Other Hand
There is good news! After a series of interest rates and tax cuts, a decrease in housing uncertainty, positive media, and more lenient bank lending guidelines, there is a significant level of improvement generated in the industry. Buyers have regained confidence in borrowing money for real estate investment. Sellers are also slowly returning to the market with a slow but steady increase in the mortgage market.
The Australian mortgage market increased from a mere 15% of GDP in the 1970s to a whopping 95.5% in 2018’s GDP, all thanks to low-interest rates. Interest rates have also dropped to a record of 1% in August 2019. In the same month, dwelling values also increased across all major cities except Perth, Darwin, and Adelaide. Sydney and Melbourne saw an increase of 1%, which, based on stats, are the markets primarily responsible for the rebounding capital gains.
Looking Ahead
What’s in store for Australia’s housing and property markets? Slowly but surely, the market is improving. Although weaker compared to last year’s stats, vendor metrics have generally risen over the past few months. The vendor discounting rates and the number of days it takes to sell a property are higher compared to the previous year. Auction clearance rates are also higher this year compared to last year even at a lower volume. With signs and evidence that the Sydney and Melbourne markets have bottomed, we are at an interesting stage of our property cycle.
Keep in mind that it’s normal for turning points of cycles to have mixed signals. While not all segments of the market will rise at the same time, the numbers show us that the future of the Australian housing market looks bright.
