This week marks great news for the Australian property market as this May, prices have experienced the smallest decline in the last 12 months, indicating that the worst of the downturn in the property market is over. Since this time last year, prices have dropped 7.3% nationally although the trajectory of the decline is slowing.
In May, prices fell just 0.4% nationally overall compared to 0.5% overall in April. At its worst, national property prices fell by 1.1% in December last year and initial forecasts predicting the market wouldn’t bottom out until mid-2020 at the earliest. Yet, the most recent data predict the turnaround of the market by the end of 2019.
With a bleak outlook on the property market having become the new norm, market experts at Core Logic are now breathing a sign of relief as a positive growth outlook appears on the horizon once again. These new glass-half-full predictions come as a result of three major factors which have boosted confidence within the last month: the surprise victory of the coalition in the election, the easing of stress-test buffers for mortgages and the June 4th interest rate cut of 1.25% from the RBA.
Tighter lending standards imposed by banking regulations were named as the primary factor behind the initial steepness of the downturn, however, the end of last year saw the Australian Prudential Regulation Authority (APRA) lifted these restrictions on interest-only lending. These ARPA changes which came at the end of last year resulted in the decline of the national market shallowing each month this year.
A significant overall drop in foreign buyers and a rise in mortgage rates were also deemed factors which contributed to the most significant downturn in the Australian property market since the Global Financial Crisis. Buyers can now rest assured that the worst of the storm has passed and prices should be on the rise again before the beginning of 2020.