2019 – A Year for Records
2019 will go down as the year when new records were set. For 2020, we’re likely to see markets in recovery mode as housing prices catch up and then overtake their previous record highs. However, we expect the rapid rate of capital gains seen over the second half of 2019 to lose steam as stock levels rise and affordability deteriorates. In 2019 we saw the housing market move through the largest & longest correction on record, followed by a fast-paced rebound in values through the second half of the year. Housing turnover fell to record lows in 2019, as did new advertised stock levels. Interest rates have been reduced to levels previously unseen, while the concentration of investors in the market also plumbed new depths.
And a year of record lows:
- The largest and longest decline in capital city home values came to an end in June 2019 (-10.2 percent over 21 months).
- The lowest interest rates on record.
- The lowest housing turnover on record with only 4 percent of homes transacting over the year.
2019 was one of the fastest recovery cycles, with housing values bouncing back rapidly over the second half of the year, led by Sydney where values are around 9.5 percent higher since finding a floor in May.
The biggest winners of the year have typically been premium value suburbs. In Sydney, this means suburbs such as Mosman and Cremorne. In fact, amongst the top 10 best performing suburbs for growth, 4 were located in Sydney and show a median value of at least $1.1 million.
Brisbane remained relatively stable compared to Sydney and Melbourne during the price slump. Stand out performers were Camp Hill in south Brisbane, with the highest total value of sales at $224,764,349; and Hawthorne in the inner city, with the greatest 5-year change in value, at 5.1 percent.
2020 –Slow but steady
The market’s pace of growth in 2020 is expected to remain positive but slow due to:
- Worsening housing affordability
- Higher listing numbers (more choice and less urgency)
- Weakening labour market
Some smaller capital cities could see improvement in conditions due to rising population fuelling housing demand and relatively healthy housing affordability, although strength of labour markets remains a wild card in these markets.
As housing values and housing demand rise we should start to see building approvals trend higher, translating to a turnaround in the weak residential construction figures late in the year.
Lower interest rates should support housing demand, however, lower rates could possibly dent confidence as households spooked by concerns around the economy and household finances.
First home buyer numbers may fade as affordability impacts participation in the market, but investors are likely to be more active, chasing capital gains and opportunities for positive cash flow considering the inverted spread between mortgage rates and rental yields. The government has taken some strides to rectify this, with programs such as the First Home Loan Deposit Scheme.
So knuckle down, Avnu readers. 2020 has the potential to be make or break time, and could best be viewed as a transition time for the Australian housing market. A transition to what, exactly? Only time will tell all.
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