Could Australia’s Housing Downturn be Changing Course?

Australians have heard an awful lot on the housing downturn gripping the nation.

With property values dropping significantly over the last year. A combination of market softness and volatility has left many would-be homebuyers and investors out of luck.

But it seems the housing correction phase is likely to come to an end.

It’s what we have all been waiting for…

As forecasts for Sydney’s property market have analysts believing that prices will bottom out by springtime and then start edging higher by the end of 2019.

These predictions came as market softness was accompanied by Labor’s proposed negative gearing policy.

Liberals helping property prices

May’s election results came as a surprise to many, but for investors and home owners with more than one property the news may have come as a blessing.

To start, the Coalition’s victory came as the Reserve Bank’s strongest indication that it would cut interest rates in June.

Meanwhile, banking regulator Australian Prudential Regulation Authority (APRA) proposed a softening of lending restrictions.

This would remove a requirement for banks to assess a borrowers’ ability to repay a loan if interest rates rose to 7%.

The CoreLogic Index suggests that price falls have significantly decelerated and even stopped all together in Sydney, Melbourne and Brisbane throughout May.

According to the ABC, property analysts say this is likely to return confidence to the Sydney market. This could come with some ‘negligible’ side effects from the Liberal’s first homebuyers’ scheme, prompting an ‘unwelcomed new boom’ as eager buyers thrust themselves back into the housing market.

SQM Research executive, Louis Christopher said,

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 factors this week as been a boost to forecasts.’

He also pointed out that there are a lot of ifs riding on this boost, especially whether the banks pass on interest rate cuts.

Independent economist Andrew Wilson supported claims of a turnaround, saying: ‘We were already starting to see green shoots.’

There was no doubt that [auction] clearance rates were trending up and pricing models were showing a slowing in the rate of decline.

But we’re coming off a very low base and there is an extremely low rate of property on sale in the market.’

Australia’s Housing Downturn turnaround in sight

It seems Australia’s falling property market has turned on a dime, with Deutsche Bank analyst Mathew Wilson saying:

APRA is now showing a willingness fold and consider “unnatural acts’’. The market will likely embrace the signal with gusto, whilst the taxpayer will incur the moral hazard.

This announcement provides a much needed boost for the housing market and the broader economy, and gives more people the opportunity to realise the dream of home ownership’.

But the proposed changes from APRA are set to reduce the negative risks on housing activity and are likely to stifle falling prices this year — creating further demand for buying according to UBS analysts.

Nationally Australians could see property prices increase as much as 5–10% over the next 12 months.

You just have to play the game right.

More to come.


Ryan Clarkson-Ledward,
For Money Morning

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Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

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