Sydney’s housing slump could be over by as early as the end of the year as a “perfect storm” of market forces lifts buyer demand and puts a floor under falling prices.
Housing experts pointed to three major changes poised to alter the direction of the market, which had been expected to only bottom out by mid-2020.
They included the Coalition’s unexpected win in the federal election last week, which has given renewed confidence to buyers and sellers anxious about Labor’s plans to cut negative gearing.
The Reserve Bank of Australia has also signalled an imminent cut to the cash rate, possibly in early June.
Such a cut would coincide with a push from financial regulators to end the current squeeze on credit.
The Australian Prudential Regulation Authority, the banking regulator, announced this week it would review a mix of stringent lending guidelines put in place when the market was booming.
Lifting these policies would allow owner occupier buyers to borrow about 9 per cent more and give more house hunters access to a loan.
CoreLogic head of research Tim Lawless said any one of these three developments on their own would be welcome news for buyers and sellers but together they would have a “material impact” on sales.
The property research group had earlier forecast a bottoming out in Sydney prices by the middle of next year, but that recovery was likely to occur sooner due to recent developments, Mr Lawless said.
“The market has become fundamentally different in just a week,” he said.
“The shadow of Labor’s negative gearing policies was hanging above sales for much of the year but a lot of confidence has returned to the market now that it’s gone. And markets survive on confidence.”
Preliminary figures suggested prices were continuing to fall at a slower pace than last year, Mr Lawless added.
“The downturn has been losing momentum since January and we’ve seen that continue this month,” he said.
Starr Partners chief executive Douglas Driscoll said the recent changes were “like all the stars aligning at once”.
“If this doesn’t trigger renewed demand from buyers I don’t know what will,” Mr Driscoll said.
“Buyers, particularly first home buyers, will be feeling like they have more wind in their sails … it will be a very different market by the end of the year.”
“We were getting almost no calls in the weeks before the election. Now they are coming fast.”
My Housing Market analyst Andrew Wilson said an even bigger bounce in activity would probably come after August.
“We’re heading into winter, which is usually a quieter period for real estate, and the true test for the market will be after that,” Mr Wilson said.
On the northern beaches agents have been fielding calls since Sunday, the day after the election, as would-be buyers sensing a recovery start looking for real estate.
Property buyer Peter Kelaher, of PK Property, said the bottom of the market in most areas was six to eight weeks ago and the market would enter into the next upward cycle over the next six months and then there would be growth for up to three to four years.
Matt Brady, of Belle Property, said the dark days of property gloom were over and buyers now felt a sense of relief and optimism.
“My phone was ringing on Sunday with people looking for real estate, there is a more stable environment now and a sense of confidence,” he said adding that a shortage of stock will also lead to an upswing in competition.
James Baker, of McGrath Avalon, said investors are expected back into the market now that negative gearing was assured.
“People essentially now have a government that can make decisions, a potential interest rate cut, a more positive media and people are now wanting to get into the market,” he said.
Brett Marsden, of BayView Beach Real Estate, said many people on the northern beaches were holding back to see what would happen at the Federal election but now that the Coalition has been returned he predicted a surge of activity.
Sydney’s median home price has fallen nearly 14 per cent since the market peaked in July 2017.