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  • Australia’s housing market outlook for 2020

    Australia’s housing market outlook for 2020

    Suburbs with the most sales of 2019 


    This time last year was tough for residential property.  Prices were falling, the Financial Services Royal Commission was in full swing, and signs were emerging of quality problems in a number of new apartment developments.

    Since then, we have seen a dramatic turnaround in market conditions with the federal election as the turning point. With conditions markedly improved, what can we expect in 2020?

    Recovery to continue

    The housing recovery is now in full swing, maintained by the Coalition win (and therefore no change to negative gearing and capital gains tax concessions), as well as three interest rate cuts, tax cuts, and the completion of the Royal Commission.

    Price growth is being accelerated by very low numbers of new listings. Buyers are back, but sellers are yet to return.

    While overall conditions are positive, there is still a variability across the country. In Sydney, premium markets are doing particularly well, but areas where there has been a high level of apartment development are not doing as well.

    Inner Perth is seeing three times the level of search activity on realestate.com.au compared to the rest of the city.

    Price growth is accelerating, but there will be two factors that will calm this rate. The first is an increase in listings. Already we are starting to see this happen in expensive Melbourne suburbs.

    The second is more new development. The latest building approvals showed an uptick, and if this continues, it will help contain price rises.

    Rents to rise

    Rents across Australian capital cities saw fairly moderate increases in most cities, and in Darwin and Sydney, median rents declined. The exception to this was Hobart where rents continue to surge ahead.

    Australia’s housing market outlook for 2020 Pip Christie
    Picture: Pip Christie

    In 2020, we expect that rental growth will begin in Sydney and start to strengthen in other parts of Australia. The main reason being is that there will be less development this year so the growth in rental housing will slow.

    First home buyers activity

    First home buyers are back and have been showing increased enquiry levels on realestate.com.au since May 2019. This year, it is unlikely to slow and a big driver of this will be the First Home Loan Deposit Scheme, which started on 1 January.

    From a personal finance perspective, the scheme makes sense. House prices have increased much faster than wage growth in many cities over the past decade and the ability to amass a 20% deposit is far harder than it used to be.

    A negative side effect of first home buyers flooding the market is that there will be pressure on pricing for lower-priced homes. This will add to house price growth in 2020.  

    Bushfire zones re-building process

    Right now, there are high levels of distress in bushfire-affected regions and high demand for emergency accommodation. Once the bushfire zones are deemed safe, there will be a lot of decisions to make for those affected and it will take time for insurance payouts to be made. 

    During the immediate aftermath and during the re-building stage, there will be high demand for rental accommodation in surrounding towns.


    Australia’s housing market outlook for 2020 Public Domain Pictures 
    Picture: Public Domain

    If we look at previous bushfire-impacted regions, there was a general increase in listings as people looked to leave the area, and this is likely to occur later this year. If people can stay and re-build, in the long run, this does seem to lead to some positive outcomes.  

    Once homes are rebuilt and the surrounding area begins to recover, bushfire-affected regions tend to outperform the wider market. This may be because better homes are built and measures are taken to prevent future catastrophic fire events. It is also likely to be because many areas that are bushfire prone are also beautiful places to live, which increases demand more generally.

    Sustainability

    While strong price growth tends to be celebrated, it doesn’t please everyone.

    A focus on sustainability will also continue to gain momentum. Part of this will be cost driven (energy-efficient homes) but also rising concern about climate change.

    New home builders have been incorporating sustainability elements into their products for some time now. This is likely to continue to flow through to existing homes.

     

    Originally published on realestate.com.au as ‘Australia’s housing market outlook for 2020’.

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    About the author

    • Raymond

      Raymond A Ram is the RAMbassador for RAMS Financial Group. Raymond works with the RAMS team to bring simple, helpful and expert information on home loans and savings accounts to life with his down to earth and cheeky personality. He enjoys seeing everyday Australians turn their dreams of saving for a goal or getting into a home a reality. 

      Growing up in Goulburn, NSW, Raymond was brought up with good old-fashioned Aussie values of hard work and a fair go. It soon became apparent that Raymond wasn't content for the conventional path of grazing, producing the very best wool, and finding a nice sheep to settle down with. So it wasn't long before his passion for performing and his talent as a likeable larrikin shone through - landing him a few roles such as 'RAMlet'. He was even tipped to play RAM-bo at one point but chose to become star of the small screen instead as RAMbassador for RAMS. He now finds this role so much more rewarding.

      Contact your local RAMS Home Loan Centre about your home loan options.

      Raymond A Ram

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  • Disclaimer:

    The information here is of a general nature only and is not intended to constitute financial or tax advice. You should consult your professional adviser, accountant or taxation expert for advice specific to your personal circumstances.

    The views and opinions expressed in this article are those of the author alone and do not necessarily represent the views or opinions of RAMS Financial Group Pty Ltd ABN 30 105 207 538 (RAMS),  Westpac Banking Corporation ABN 33 007 457 141 (Westpac) or their related bodies corporate. This article is strictly for information purposes only and neither RAMS, Westpac nor any of their related bodies corporate make any representation as to the accuracy or completeness of the information in this article or endorse the views expressed in it.