Insights

2019 Summary

2019 was the year of records and extremes for our property market. We saw the property market navigate into the greatest and lengthiest correction on record, which then was subsequentially followed by a rapid rebound in house values through the second half of the year. Housing turnover and clearance rates fell to record lows in 2019, as did the volume of new advertised stock levels. Interest rates reduced to levels previously unseen, while the numbers of investors in the market also rapidly declined.

Key takes

– Between the market peak in October 2017, and the trough in June 2019, the national index fell by 8.4%. Larger peak-to-trough falls were recorded in Sydney (-14.9%) and Melbourne (-11.1%), where housing conditions had previously been the strongest.

– Since reaching the floor in June 2019, the national index has rebounded by 4.7%, with the monthly growth rate in November being the highest achieved since 2003.

– The main contributors to the house price rebound were 3 cash rate cuts, an easing in the lending policy through adjustment by APRA, and the federal election results which removed uncertainty around negative gearing policy and capital gains discount.

2020 Forecast

– For 2020 we expect to see the market continue to make a rapid recovery following the downturn in 2019, with prices will then once again begin to overtake their previous record highs.

– We predict stock levels which have remained low will likely rise in early 2020. Strong selling conditions paired with high clearance rates and pent up demand of homeowners who have been waiting to sell will all result in a surge of new stock on the market.

– Key economists are predicting the cash rate will drop by a further fifty basis points during the first 6 months of 2020. This would take the interest rate down to 0.25%, meaning that mortgage rates too are likely to reduce even further from their record lows. Lower mortgage rates are likely to support a steady increase in buyer demand.

– We expect investors to once again return to the market. In 2019 investors made up under 25% of mortgage demand. This was understandable considering the uncertainty around the federal election and changes to potential reforms to negative gearing. In 2020, investors are likely to once again be motivated by prospects of capital gain as well as the fact that it is likely that rental yields will be higher than the cost of debt.