Though the Australian property market prospects looked gloomy in early 2019, the outlook for 2020 is truly optimistic amidst a tremendous recovery in property prices over the last year.
The market experts expect the inner-city suburbs of the nation’s biggest cities to observe a double-digit surge in dwelling values in 2020.
The country’s property market had already surprised the market experts in 2019, exceeding their initial expectations of a slump in residential property values. Though the first half of the last year was very disappointing, the second half noted a robust revival in dwelling values.
The revitalisation in house prices was majorly driven by the RBA’s three interest rate cuts since June last year, which turned the housing growth positive during the last year.
Property Prices Improved Substantially in Q4 2019
As per the property consultant - CoreLogic, the Australian property market finished 2019 quite strongly with house prices observing a maximum rise of 4 per cent in the December quarter. This was the largest growth in the nation’s property values over the quarter since November 2009. The quarterly gain in property values was driven by Sydney and Melbourne, wherein prices rose by 6.2 per cent and 6.1 per cent, respectively.
Over the three months to December 2019, Sydney was the best performing capital city, while Darwin demonstrated the least improvement.
Recent statistics also demonstrate that dwelling values improved by 1.1 per cent in December, with Sydney and Melbourne witnessing a maximum rise of 1.7 per cent and 1.4 per cent, respectively.
In addition to monthly and quarterly data, the dwelling values were equally fascinating over the calendar year 2019. Out of eight capital cities, five recorded a rise in property values except Adelaide, Perth and Darwin.
Below are the factors that led the recovery in property market:
- Improved housing affordability,
- A relaxation in borrower serviceability assessments,
- Lower mortgage rates, and
- Renewed certainty around housing taxation policies subsequent to the federal election.
How Did Property Market Perform in Initial Three Quarters of 2019?
Though the property prices showed a healthy recovery in Q4 2019, the performance of the housing market in initial quarters (particularly Q1 and Q2) was relatively soft.
Q1 2019: House Price Downturn Spread to All Capital Cities
The first quarter of 2019 raised eyebrows when property prices slipped in all the eight capital cities of the nation, inducing experts to provide a pessimistic outlook for the year ahead.
As per the ABS data, the housing prices plunged by 3 per cent during the quarter, with Sydney and Melbourne declining by 3.9 per cent and 3.8 per cent, respectively.
The total value of Australia’s housing stock slid sharply by $172.7 billion during the quarter, to $6.56 trillion.
The fall in property prices was led by a reduced demand from owner occupiers and investors and a continuation of tight credit supply over the period. The disappointing results were in line with the lower auction clearance rates and sales transactions, and soft housing market indicators.
Q2 2019: Modest Improvement in Hobart and Canberra
The performance of the housing market in the second quarter of last year was not promising in the Australian capital cities, except Hobart and Canberra, which witnessed an improvement in dwelling values.
The data showed a fall in the housing prices by 0.7 per cent during the quarter, with Sydney and Melbourne declining by 0.5 per cent and 0.8 per cent, respectively. The total value of Australia’s housing stock slid sharply by $17.6 billion during the quarter, to $6.6 trillion.
It was seen that the fall in Melbourne’s property prices was relatively higher than Sydney’s prices during the period.
The falls, however, moderated in almost all the capital cities over the period, driven by an improvement in auction volumes and clearance rates.
Q3 2019: A Turnaround in Property Sector
There was a complete reversal in the property market’s performance in this quarter, with a significant rise of 2.4 per cent in dwelling values. Australia’s biggest capital cities - Sydney and Melbourne drove the rise with property values increasing by 3.6 per cent in both the cities during the period.
In addition, the total value of Australia’s housing stock improved by $189.9 billion to $6.86 trillion in the quarter.
The increase in dwelling values was in accordance with other housing market indicators, including auction clearance rates, new lending commitments to households and sales transactions.
It is worth noting that the last year was a year of both highs and lows, with dwelling values collapsing in first half of the year and surging significantly during the other half. Market experts expect the housing price growth to remain robust in 2020, backed by strong population growth and other favourable housing market conditions.
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