National Property Market Overview
Well, what a quarter. Quarter 2 2019 had absolutely everything going on and at the same time not much going on.
“A” grade stock and listings across the board were down. Homeowners that weren’t under pressure to sell were sitting on their properties and refusing to list them in an unstable market environment. Investors who were interested in buying but unsure of market conditions were also sitting on their hands.
It felt like everyone was waiting to see how the events of May 18th, the Federal Election, were going to unfold. And though it was a big upset that the Liberal party retained power the vast majority of real estate players and home owner’s breathed a sigh of relief on Election Day.
Labour’s contentious proposal to remove negative gearing on established properties and increase the amount of capital gains tax payable had the investor market unsure what the future would bring.
First Home Buyers were offered a leg up by both parties. Eligible homebuyers could purchase a house with a deposit as low as 5% and not have to take out Lenders Mortgage Insurance. The First Home Loan Deposit scheme backed by the government would commence from 1 January 2020.
The election was not the only big news in Quarter 2.
For the first time in almost three years, the RBA changed the official cash rate. In a historic move, the Reserve Bank cut the cash rate by 25 basis points to a record low of 1.25 percent. This marks the first move in the official interest rate since August 2016, when the RBA dropped the cash rate from 1.75 percent to 1.5 percent.
Two of the four (Commonwealth and NAB) big banks matched the interest rate cut, with ANZ and Westpac taking heavy media fire for only passing on 0.18% and 0.20% respectively.
Many leading finance experts predicted that the RBA would cut the cash rate again in August. And they were right! The RBA cut the rate to a new record low of 1%. The Commonwealth Bank, National Australia Bank, and Westpac have only passed on the rate cut in part to their home loan customers, while the Australia and New Zealand Banking Group (ANZ) is the only bank to confirm it would pass on the rate cut in full.
APRA (Australian Prudential Regulation Authority)
And if that wasn’t enough APRA has proposed loosening the screws on borrower lending.
In December 2014 APRA directed lenders to impose a serviceability assessment that incorporated a buffer of at least two percentage points above the loan product rate they were offering and a minimum floor rate of at least 7%. This meant the lenders had to satisfy themselves that the borrower could cope with 7% even if the mortgage rate was 4%.
APRA’s proposal to scrap this rule has been reported on widely. Warren Hogan, from Smart Property investment “my calculations suggest it would increase the borrowing capacity of home buyers by as much as 10%, enough to have a material positive impact on the housing market.”
It is still very much a watch this space, but many lenders and borrowers have their fingers crossed and one crafty lender tried to sneak it in early and was rebuked by APRA.
Quarter 2 has ended very differently from how it started.
Buyer confidence is returning to the market, numbers are up at auctions and clearance rates are improving. National housing market conditions continued to improve through June, with CoreLogic reporting a 0.2% fall in national dwelling values; the smallest month-on-month decline in the national series since March 2018.
CoreLogic’s June report showed home prices nationally fell 0.2% in June from May, when they eased 0.4%. The pace of decline has gradually slowed since December when prices slid 1.1%. Home values in Sydney inched up 0.1% last month, marking its first monthly rise since July 2017. In Melbourne, prices rose 0.2%, recording the first increase since November 2017.
Australia’s housing market downturn appears to be coming to an end but what is under the debate is the timing. Some leading economists predicting a spike in house prices as soon as July whilst others are predicting that house prices will continue to fall (primarily in Sydney and Melbourne) before rising “modestly” in 2020”.
AMP Capital chief economist Shane Oliver stated “The combination of the removal of the threat to property tax concessions, earlier interest rate cuts, financial help for first home buyers and APRA relaxing its 7 percent interest rate test points to house prices bottoming earlier and higher than we have been expecting,”
Read on for our capital city and state reviews by our State Managers in Melbourne, Brisbane and Adelaide.