A turbulent 12 months has seen house prices fall by double digits followed by a “mini boom”, leaving investors wondering what is next for the housing market.
Before the election, Australia’s largest capital cities fell by double digits, before regulatory changes and low interest rates invited investors back into the market.
According to CoreLogic’s head of research, Tim Lawless, “We are seeing more urgency coming back into the market, especially in Melbourne and Sydney where housing values have risen 6 per cent and 5.3 per cent since May.”
Despite the potential higher costs, low interest rates and tax cuts are in favour of prospective buyers who would pay the smallest proportion of their income since 2004, which could encourage further investment.
What’s next for the property market
According to HIA’s quarterly economic and industry outlook report, the housing market has stabilised, albeit well below levels of the past five years.
HIA chief economist Tim Reardon believes markets will not recover the ground they lost last year.
“Total lending is up from a low point in April 2019. This result is mirrored in new home sales data, which also shows April as the bottom of this cycle. The upturn since then has been very modest and best described as a stabilisation in conditions,” added Mr Reardon.
However, if the value increases in Sydney and Melbourne continue, Australia’s two largest markets could be set for a new high in early next year, according to CoreLogic.
Supply in the housing market will continue to fall, with new detached home market forecast to fall from 111,701 in 2018-19 to 102,126 in 2019-20, before a smaller contraction in 2020-21 to 101,087 to levels experienced in 2013-14, HIA’s research showed.
“Apartment commencements are likely to pause until those apartments that are currently under construction are completed and occupied. This will see multi-unit commencements fall from 85,108 starts in 2018-19 to 72,549 in 2019-20,” Mr Reardon concluded.