I can feel it — our property markets are on the move!
In fact, almost everyone involved in property has noticed a marked change in consumer confidence, buyer enquiries and general interest.
Most property economists believe the worst of the housing downturn is over, with a stabilisation of the Sydney and Melbourne real estate markets, and property-price falls now levelling off elsewhere.
Melbourne and Sydney enjoy the strongest economic conditions in Australia, and despite being the two most unaffordable markets, are the only locations which so far to have shown green shoots.
Firstly, there was a strong rise in auction clearance rates in our two big capitals, and as of June, housing prices are up by 0.1% in Sydney and 0.2% in Melbourne.
Factors that led to this change in the market momentum include:
- Increased confidence now that the Coalition has won the federal election;
- The Australian Prudential Regulation Authority (APRA) easing the bank’s assessment criteria for new loans, which should commence in the next month;
- Two interest rate cuts and the prospect of more to come;
- Tax cuts are on the way, meaning more money in our pockets;
- The best housing affordability nationally since 2016;
- Positive messages in the media stoking consumer confidence; and
- First-home buyers returning to the market encouraged by government incentives.
And this will only get better in the next few months, as APRA’s changes haven’t really worked their way through the system yet, many homeowners and investors aren’t yet enjoying the lower mortgage rates, and the tax cuts are yet to hit our hip pockets.
We’re at an interesting stage of our property cycle with signs we’re nearing the bottom.
While there may be a little more downside in our two capital city markets, it looks like the best time to buy counter-cyclically in Sydney and Melbourne for over a decade and to ride the Brisbane property cycle.
Canberra property should continue to perform well and Adelaide should hold its own, but it’s likely Hobart will now slowly move to the slump phase of its own property cycle and there is still more downside for Perth and Darwin.
Of course, property will remain a sound asset for long-term wealth creation. But now more than ever, correct asset selection will be critical, so only buy in areas where there are multiple long-term growth drivers, such as employment growth, population growth or major infrastructure changes.
Similarly, suburbs undergoing gentrification are likely to outperform.