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With several leading property economists now in agreement, it’s now safe to say the future of the Australian market is looking up. While the outlook for the Brisbane property market has been trending positively for the last 6 months or so with plenty of good news announced recently, it seems the rest of the country is also set to follow a similar trajectory.
Nationwide, sentiment reports have been indicating that Australians in the property market have become more optimistic about the housing market looking forward. The second quarterly ME Property Sentiment Report, conducted in July 2019, indicates that overall Australians are much more positive than they were three months ago. With the Federal Election, APRA’s proposed serviceability changes, and two RBA cash rate cuts, all dramatically influencing the optimism Australians now have for the future of the countries housing market.
SQM Research Chief Executive Louis Christopher is confident the election result has been a major contributing factor to the new market confidence.
“Before the election, it was clear buyers were sitting on their hands. With the election we were predicting a return of confidence just if the Coalition was re-elected, so the combination of these other factors has been a real boost to forecasts,” he said.
Expectations for house prices over the next 12 months have become more optimistic, with only 17% expecting them to fall (28% in April), compared to 38% expecting prices will rise (32% in April), and 30% expecting them to stay the same (29% in April). Respondents across all major cities had a more positive outlook on prices; significantly more people in NSW, VIC, QLD are predicting prices to go up, and noticeably more people in NT, TAS, NSW and VIC are predicting prices will no longer fall. Positive house price expectations were also seen across all property status types, with owner-occupiers changing their tune the most since April.
As well as the election results, interest rate cuts and mortgage accessibility changes, other key indicators that the national market is looking up is the surge in population numbers, with an increase in demand reducing the “oversupply” that existed in the majority of capital city markets last year. An increase in rental yields is also seeing investors return to the market after an extended absence, further driving substantial growth. The result is a noticeable increase in Australian’s confidence, with many more home buyers and investors showing a renewed interest in the market.
ME’s Group Executive Customer Banking, Craig Ralston said: “Australians in the property market have become more optimistic about house prices, perhaps reflecting a number of changes in the external environment since the last survey.”
It’s not all positive though, and people in the property market still have their worries. Housing affordability remains the top worry with 93% agreeing that ‘despite price falls in some areas they still think housing affordability is a big issue in Australia’, up from 88% in April. Aside from housing affordability, all other perceived worries queried in the report have eased over the past 3 months; concern about tighter credit policies (10 point drop), concern over negative equity (7 point drop), and worry about being forced to switch to interest-only repayments (7 point drop), and worry about property values falling (5 point drop) all eased.
On another positive note, Australians in the housing market see price movements as a growing opportunity; 61% said they were happy property prices are falling (up from 59%) because it increases their chances of buying a property, with more first home buyers happy with recent price movement than other cohorts (86%). The ME report also found more people are sitting on the fence when it comes to transacting property; less are intending to buy, less are intending to sell. The most likely buyers are unsurprisingly higher income earners (45% of those earning over $125,000 intend to buy).
“There are more fence sitters who appear to be taking a ‘wait and see’ approach to the market – which is not surprising considering the recent economic and political changes,” said Mr Ralston. “The housing market has seen a moderation in the rate of house price decline in Australia’s key property markets over the last 3 months. Positivity among sellers and owner-occupiers suggests these groups see the recent market trends as a sign their homes are retaining or regaining value again,” he said.
According to forecasts from BIS Oxford Economics, unlike the previous market, when buyers were willing to pay higher prices — despite low rental returns — because the strong market gave them capital growth, the next cycle would mean slower price growth.
“Demand is expected to outpace supply in the three years to 2023/24, gradually building up the underlying rental dwelling deficiency during this time to an under supply,” the latest BIS report says.
“The emergence of that deficiency is expected to underpin rental growth during this period, although the rate of growth will likely be slower by historical standards.”
“It will probably start with rentals before it starts with prices. We will hear stories about tenants lining up outside buildings, around the corner. Then eventually that will flow through to prices,” says BIS Senior Manager, Angie Zigomanis.
With the recent 0.1 and 0.2 per cent monthly price increases in Sydney and Melbourne markets, many experts now believe this portents to further and most significant rises still to follow for the remainder of 2019 in all capital city markets. With experts and consumers now in agreement and a renewed optimism in the market, it’s only a matter of time before we really start to see the impact: where expectations go, prices usually follow.