It seems the good days are back for the Australian property market, which has been struggling with lower dwelling values in the last few years. Last year this time, the market experts were projecting a huge property market slump in Australia by the end of 2019; however, surprisingly, the market began to show solid signs of recovery in the second half itself. Just a year has passed, and the experts seem to be quite optimistic about the performance of the nation’s housing market in 2020.
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One of the leading property listing portals of Australia, Domain now expects a growth of 8 per cent in residential price nationally in 2020, with Sydney taking the lead – surging by 10 per cent by the end of 2020. The group has almost doubled its projections for the Australian property market relative to its last issued forecasts in June 2019.
The group’s forecasts are fueled by the greater-than-expected revival in dwelling values later last year due to the record low interest rates. Moreover, the dwindling supply and growing demand for dwellings are expected to boost the market growth.
Another property consultant, CoreLogic, is also expecting the fastest market recovery on record in 2020, led by owner-occupiers, with regard to the length of the downswing. Moreover, the consultant has anticipated record-high values across the nation’s dwellings in a few months’ time.
Property Market Ended 2019 in a Bright Spot
The projections for 2020 are well supported by the strong performance of the property market in the December 2019 quarter. As per the national home value index released by the property consultant early in 2020, the dwelling values surged by 4 per cent over the December quarter, finishing out 2019 on a sunny side.
The quarterly rise represented the fastest pace of national dwelling value increase over any quarter since 2009 November month. The quarterly results announced by the property consultant demonstrated the following:
- Dwelling values rose by 6.2 per cent in Sydney, making it the best performing capital city.
- Darwin was the weakest performing capital city, wherein values fell by 1.4 per cent.
- The rental yield was highest (5.9 per cent) in Darwin and lowest in Sydney (3 per cent).
Over the year 2019, the nation’s dwelling values surged by 2.3 per cent, with 5 of the 8 capital cities observing the year out in positive growth territory. Among all the capital cities, Melbourne and Sydney recorded the maximum annual capital gain – both cities posting a rise of 5.3 per cent in dwelling values over 2019.
On an annual basis, Adelaide, Perth and Darwin saw the lowest annual capital gain, with values plummeting by 0.2 per cent, 6.8 per cent and 9.7 per cent, respectively.
2019 is believed to be a year of two distinct halves by market experts, with dwelling values plunging over the first six months and reviving over the second half. The experts consider the housing value rebound to be spurred by:
- improved housing affordability,
- lower mortgage rates,
- renewed certainty around property taxation policies after the federal election,
- lower advertised stock levels, and
- a relaxation in borrower serviceability assessments.
Housing Market Recovery Continues in 2020
The national home value index of January 2020 released by the property consultant demonstrated that housing value rebound persisted into 2020, improving by 0.9 per cent over the month. This took the annual growth rate to 4.1 per cent, representing the fastest pace of growth for the 12-month period since December 2017.
In January, the property values increased across every capital city; however, the values remained firm in regional South Australia over the month.
The data showed that a recovery trend which commenced midway in 2019, particularly in Sydney and Melbourne, has spread to other capital cities too. However, Sydney and Melbourne continued to lead the trend, gaining substantially after observing considerable declines during the recent downturn.
The dwelling values recorded for Perth in January were very encouraging, with the city observing a rise of 0.1 per cent over the month, emerging from a slump seen in last five years. In addition to Perth, Darwin, which has been consistently falling, saw a subtle increase of 0.1 per cent over the month.
It’s Surely a Remarkable Recovery!
In its latest update, the property consultant mentioned that the Australian dwelling values, which bottomed out 8.4 per cent below their peak at June 2019, have quickly recovered 6.7 per cent.
In case the property rates continue their growth trajectory seen in January, the market is expected to make a complete nominal recovery by April’20, marking a recovery period of about 10 months, which is relatively lower than the average recovery time of about 11.7 months seen in previous cycles.
The property consultant stated that the nation’s dwelling market saw 20 months to trough between 2017-19, and is expected to observe just 10 months to recovery, demonstrating that market recovery could be half (ratio of recovery period to decline = 0.5) the length of the downturn.
The data announced by the ABS on housing financing demonstrated that the recovery was driven by increased activity from upgraders, first home buyers and downsizers. The latest ABS statistics on lending indicators for November 2019 revealed that the value of new loan commitments for housing surged by 1.8 per cent, underpinned by 1.6 per cent growth in the value of new loan commitments for owner occupier housing.
Though lending commitments and dwelling values data of the end months of 2019 have been quite promising, ABS’s building approvals statistics for December 2019 were pretty discouraging. The ABS data showed a fall in total dwellings approved in seasonally adjusted terms, which declined by 0.2 per cent in December. This suggests that there is a space for improvement in this area of the nation’s property market.
The existing scenario strengthens experts’ projections of a robust recovery in the nation’s property market in 2020, applying a halt on the long-running downturn. Though growth in building approvals is still sluggish, the fundamental indicators of the market look stronger now.
In addition, the central bank’s decision to retain low interest rates for some period of time is expected to increase the number of new home buyers in the coming days.
In a nutshell, the Australian property market is demonstrating a healthier position than seen during the last year this time.