City Markets Move Into Recovery Mode

Posted on 2/08/2019  
City Markets Move Into Recovery Mode

Real estate markets across Australia are showing strong signs of rising, according to three separate reports from major institutions.

The Commonwealth Bank, ANZ Bank and Genworth Mortgage Insurance all say that big city markets have passed the bottom of the trough and are rising again. This is supported by the latest price data from SQM Research and CoreLogic, which both recorded price uplift in most capital cities in July.

Commonwealth Bank, the nation’s largest property lender, says there are clear signs that big-city property markets are set for a rebound. Property prices will climb back into positive territory in the second half of the year and should generate positive returns in 2020.

Interest rate reductions, tax cuts, easier borrowing, rising population and improved sentiment are combining to boost market activity and offer early evidence of sustained improvement. The return of a federal coalition government has removed fears of changes to negative gearing and capital gains tax.

“Home buying intentions have been in negative territory since 2018, but current readings suggest the market is turning,” CBA chief economist Michael Blythe says.

ANZ expects property prices to increase to increase later this year following “a sharp turnaround in sentiment”.

According to the bank's quarterly housing report, prices are bottoming out and will "rise modestly" through to the end of 2019 before growing more strongly in 2020. Just two months ago ANZ did not expect to see house price growth in 2019, but it’s new report is considerably more optimistic.

Prices in Sydney are expected to increase by between 3% and 4% and by more than 4% in Melbourne over 2020. Darwin is the only capital city forecast to see price falls next year, according to ANZ.

ANZ's senior economist Felicity Emmett says that after two years of price declines in Sydney and Melbourne, the market is stabilising.

"Reduced access to finance had been weighing on the market, but regulatory easing and two interest rate cuts - and likely more to come - have combined to lift sentiment sharply," Emmett says in the latest report.

Genworth Mortgage Insurance says it expects recently lowered interest rates coupled with other economic stimuli to halt the decline in housing prices experienced earlier this year, particularly in Sydney and Melbourne.

Genworth chief executive Georgette Nicholas says the recent reduction in the official interest rate to 1%, government tax cuts, APRA changes to serviceability plus state and federal infrastructure investment as contributors to a promising economy.

"The rate of housing decline has really slowed over the last three months, and the price point has got to a point of stabilisation where buyers are starting to come back into the market," she says.

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