Lower interest rates and the loosening of mortgage serviceability tests will see Australian residential property prices continue to rise throughout 2020, according to new research.
The latest forecast from Macquarie Wealth Management is for national dwelling prices to rise a further 6 to 7 per cent next year, following the solid growth of the past few months.
Sydney and Melbourne housing prices are expected to increase by 8 to 10 per cent over 2020.
The Macquarie report says: “This will be supported by low interest rates, the spectre of further monetary policy easing and once again the emergence of ‘animal spirits’ or the ‘fear of missing out.”
Tim Lawless, head of research at CoreLogic agrees: “The synergy of a 75 basis points rate cut from the Reserve Bank, a loosening in loan serviceability policy from the Australian Prudential Regulation Authority, and the removal of uncertainty around taxation reform following the federal election outcome, are central to this recovery.”
The 2020 forecast is in line with the latest figures from The Australian Bureau of Statistics which reveal that property prices rose 2.4 per cent in the September quarter, the strongest quarterly growth since December 2016.
In addition, house prices in Sydney and Melbourne had strong growth over the quarter at 4 per cent and 3.7 per cent compared to Hobart at 1.3 per cent and Brisbane at 0.7 per cent.
The Macquarie report says: “The pick-up in Sydney housing price growth has been the fastest in several decades, with Melbourne price growth also very strong by historical standards. The strength in these cities’ housing prices has meant that overall capital city prices have risen much more strongly than prices in regional areas.”
CoreLogic’s latest figures show national dwelling prices picked up 4.7 per cent from the trough in June. Despite this, values remain 4.1 per cent below the 2017 peak.
Tasmania saw the strongest growth from the broader regional areas of the states with values up 2.2 per cent over the past three months, followed by Queensland at 1.8 per cent, New South Wales at 1.2 per cent and Victoria at 1 per cent.
According to Lawless, the recovery trend is mostly concentrated in the premium sector of the market particularly in Sydney and Melbourne where top quartile of the market is outperforming the rest.
Lawless says: “As housing values become less affordable in these high-end markets, demand is likely to ripple outwards to the more affordable areas.”
Macquarie forecasts that sales volumes will continue to strengthen alongside price growth. It stresses that housing sales volumes have historically moved with dwelling price growth.
The report says: “There has also been a clear pick-up in new listings of homes for sale, particularly in the strongest housing markets of Sydney and Melbourne. Despite the lift in listings, the stock of unsold homes on the market has been falling amid strong demand.”
Lawless disagrees: “Additionally, we’re seeing advertised stock levels persistently low,
creating a sense of urgency in the market as buyer demand picks up.”
Rental market growth remains slow with minimal drops of 0.1 per cent in Sydney, 0.5 per cent in Darwin and 0.6 per cent in Hobart for November.
Despite the drop in Hobart, it experienced the largest annual rental increase at 5.8 per cent, followed by Perth at 2.3 per cent.
Lawless says these rental conditions can be attributed to factors such as rising rental supply, an increase in construction of high rise apartments and the large number of renters that have recently transitioned to first home buyers.