It’s the beginning of a new year and now is the time when the so called “experts” make their property market predictions for the year ahead. 2019 went from freefall to boom in just a few short months, find out why below and keep reading for what to expect in 2020.
Just as the slump in the property market was related to APRA’s decision to restrict lending amidst alarm about poor lending standards, the upturn coincided with a relaxing of credit restrictions.
Scott Morrison’s surprise election victory on 18 May also seemed to change the regulatory landscape and APRA quickly told banks they could relax lending standards again. This combined with three successive interest rate cuts by the Reserve Bank transformed the housing market and buyers were once again on a borrowing spree.
The availability, since May 2019, of the cheapest mortgages in Australian history (with rates now starting at 2.79%) helped release the pressure built up during two years of tighter lending and the three rate cuts in five months brought rates to an all-time low in October 2019.
Both Sydney and Melbourne recorded a jump in median house prices of about 5% in the two quarters since the market turned. This sharp upsurge came as interest rates were at an all-time low and stock availability was limited. Clearance rates rocketed to (and have held at) about 70% for both cities, which many believe equates to about a 10% yearly price rise.
This demand presented lots of challenges for our clients trying to purchase in the ‘red-hot’ Sydney inner-west and eastern suburbs, but we were able to guide and finalise many clients in their buying journey in the second half of 2019.
HOT TIP = Bear in mind, most agents are pricing homes consistently 15% – 30% under what properties are actually selling for. Contact us for help in determining a properties true market value.
2020 and beyond
Whilst there are several variables, another interest rate cut and a continuing under supply of properties within Sydney’s inner ring will most likely lead to further significant growth, in particular for houses, in the coming year. In addition, we will see the surrounding suburbs enjoy growth due to the “ripple effect” from the undersupplied and overly popular inner ring areas.
Further out in the suburbs (such as the north-west and south-west growth corridors) the growth will be more level and stable as there is still a lot of new house and land development stock available and consequently undersupply is not an influential factor.
Brand new and high-density apartments will continue to struggle both from a capital growth standpoint and from the difficulty of getting lending from banks. Certain suburbs are still oversupplied with apartments and owners continue to wait for demand in those areas to catch up.
Off-the-plan (OTP) purchases being completed this year will likely see inconsistencies in bank valuations and potential problems when it comes to finalising the finance from the banks. Financing & valuations are the biggest challenges so ensuring you are prepared with your finance early and not leaving it until the last minute will minimise potential issues with OTP. Contact us before your land registers so we can arrange the most suitable option for you, well ahead of your move in date.
Is 2020 the right time to buy property?
Hindsight is an amazing thing… 12 months on we can see that Quarter 1 of 2019, prior to the election, was an advantageous time to buy. This is because many Sydney suburbs have seen nearly 10% growth since then. However, we don’t have a crystal ball and very few people predicted such substantial increases.
Therefore, if you have the opportunity or ability to purchase property and your plan is to hold the property medium-long term than why not now? If you have been wanting to purchase but haven’t committed, then why not make this year your year to take action?
If you would like help understanding your financial position or making a plan to achieve your financial goals in 2020 contact us, we can help you get your head and finances around everything. And save you mountains of time, money and stress along the way.
- We’re here to answer all your questions and explain how the whole home buying, loan-getting process works – in simple language, not baffling finance jargon.
- We’ll give you guidance to make wise decisions – not just as expert brokers, but young home buyers who have been in your shoes and made good property moves.
- Whether you need a loan to go home hunting (pre-approval) or have found your dream nest, we’ll compare home loans from up to 25 lenders to secure the right one for you.
- We don’t just organise great loans. We’re by your side when you need us all the way from your very first bashful question to settlement delight and years to come.
- And, best of all, our mortgage broker services and expertise don’t cost you anything. Seriously. The lender you choose pays us a commission out of their money once your loan is settled. Nice, huh?
For more information on any of the above contact Dylan Salotti, Managing Director of Divitis Finance on 0430 227 328
