• Greg Morgan

Optimism Returns to the Market

Australians are feeling much more positive about the property market, with prices expected to rise in 2020 by homeowners and experts alike. After a period of decline and pessimism, double-digit gains are expected in Sydney and Melbourne next year alone. While forecasts are dependent on interest rates, economic growth, and wider global conditions, time may be running out for first home buyers to get in at the bottom of the market.

According to a new report from SQM Research, the most likely "Scenario 1" is for prices in Melbourne to rise 12-17% in 2020, with Sydney just behind at 11-16%. Other capitals are expected to see much more moderate growth, however, ranging from 1-4% in Adelaide, 3-7% in Perth and Brisbane, 5-9% in Hobart, and 3-8% in Canberra. Darwin was the only capital with falling price expectations at -5%, with the Capital City Average Index sitting at 7-11%.

Louis Christopher from SQM expects Sydney and Melbourne to pass their 2017 price records before the end of September: "Strong population growth rates, easier access to housing credit and continuing stability from their local economies will provide the fuel for this new upturn." It's important to note, however, that this is just one of four noted scenarios, with the second most likely outcome seeing even more growth and other scenarios seeing reduced numbers based on early APRA intervention and weakening global trade.

Australian homeowners are also feeling more optimistic about the year ahead, with 42% of people in the property market feeling more positive than last quarter in the latest ME Bank Quarterly Property Sentiment Report. While sentiment improved across the spectrum, the most optimistic groups were millennials, investors, and those planning on buying property in the next 12 months. Investors were the most likely to be involved in the property market at 66%, followed by first home buyers at 48%, and owner-occupiers at 45%.

According to ME’s General Manager for Home Loans, Andrew Bartolo, the market has reached a critical turning point: “After a period of price declines in Australia’s key property markets, consistent house price increases over the past three months have created a much-needed period of stability, providing more certainty that early price increases weren’t simply a blip in the data."

It's not all good news, however, especially if you're still struggling to save for a deposit. While more Australians are willing to enter the property market after a period of sitting on the fence, housing affordability remains a huge concern. In the ME report, 89% of respondents agreed that "despite price falls in some areas, they still think housing affordability is a big issue in Australia."

According to Mr Bartolo, “Affordability is a much more complex issue than the price of houses and this enduring concern highlights that much more needs to be done to address the issue... sentiment among first home buyers didn’t surge as much as others, which suggests the recent house price movements may have marked the end of a unique opportunity to buy ‘at the bottom’... The recent uptick in first home buyer activity recorded by the ABS may represent the scramble to get in while they can due to renewed affordability pressures as prices rise.”

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