As 2019 rapidly comes to a close, we thought it would be worthwhile to look at what might be in store for the Melbourne property market in 2020.
We do this on the back of the current state of the property market and the economic factors that got us here, namely:
· Property supply remains low, as vendors are holding off selling hoping for higher prices to come. Although agents report some increase in listings over the traditionally busy Spring period, supply continues to fall well short of demand. As an example, anyone looking to purchase a house in the popular suburb of Carnegie at the beginning of November, would have only found six properties to choose from;
· Bank lending policy has relaxed in favour of borrowers with the recent loosening of credit lending criteria;
· The October 0.25% cut to the RBA cash rate to a historic low of 0.75% has further reduced borrowing costs; and
· Demand is more robust than it was in the first half of 2019, with the popularity of auctions returning and clearance rates above 70% week-to-week.
What this has meant for the Melbourne housing market this year is a rebound in prices that commenced following the Federal election. Specifically, the median house price has increased 4.1% in the September quarter and 5.5% overall since March 2019.
So, what does this mean for the market in 2020? The answer depends on several factors:
· Property supply – will sellers be encouraged to list their property on the back of the increase in prices? If so, the increase in house prices may slow as supply catches up to demand.
· Bank lending policy is not expected to change, but the introduction of the proposed First Home Loan Deposit Scheme, due to commence on 1 January, will bolster demand. The scheme is designed to allow eligible first-time home buyers to take out a mortgage with just a 5% deposit and avoid paying lenders mortgage insurance. This will be positive for house prices, especially for the more affordable properties.
· Are there further interest rate reductions? Who knows; but the RBA has flagged that there is still room for a reduction, unless the recent income tax and rate cuts, and hopefully some drought relief, stimulate the economy in 2020.
One would think that all this is enough to confidently predict where the Melbourne housing market is headed in 2020. In one respect it is, as major forecasters expect house prices to continue to increase. What they can’t agree on, is by how much:
· QBE + 0.6%
· Domain + 1.0% - 3.0%
· CoreLogic + 1.3%
· ANZ + 4.3%
· Moody’s + 7.0%
· SQM Research up to + 17.0%
So, with the range of +0.6% to +17.0% sufficient to cover any eventuality, let’s reflect on these forecasts this time next year when we know what actually happened and see who got it (most) right.
Our view is that demand will continue to drive prices into the new year, and barring an interest rate rise, this trend will continue. It’s possible that SQM Research may well take out the prize for being closest in years time.
Early next year we will again survey a number of agents to find out how they see the market moving. So far, they have been accurate with their predictions.
In the meantime, the team at Tower wishes you and your family a joyous Christmas and a prosperous New Year, regardless of what the property market does!
Robert Allanadale Director