You probably think you’ve heard all you can about Australia’s declining housing market.
But there’s always more to come.
In 2019, you can expect another year of modest price falls within a weakening environment, as well as the usual credit tightening. In Melbourne, a growing population could give footing for declines as more relocating residents look for forever homes.
But while everyone is quick to publish how bad housing prices have been, there’s been little context to these claims. Let me explain.
Changing expectations needed for property
After five years of climbing prices, people have been accustomed to a housing market that would continue to rise. That is until the royal commission and its regulatory clamp down on back loans and credit lending tightening.
But it’s now time according to NAB group chief economist Alan Oster, as reported by Domain.com.au, that:
‘People’s expectations have been changed from expecting markets to keep going up to expecting markets to keep going down.
‘We would say that sort of adjustment in Melbourne would still be quite orderly.’
Which saw Mr Oster cut his forecasts to be line with a peak-to-trough price fall of around 15%, with a 7% or close to drop in 2019.
A mixed market means that some suburbs are performing better than others.
Willing homebuyers aren’t able to borrow as much money as they once could prior to the commission. This means auction prices, or more likely bidding prices, will be reduced as people will be unable to match vendor expectations for their properties.
BIS oxford Economics associate director of residential property Angie Zigomanis said:
‘This is going to reduce people’s ability to bid the prices a vendor might want to receive for their properties.’
‘We’re still going to find the market pretty tough for the next 12 months,’ He added.
Zigomanis predicts Melbourne’s property prices to see declines of five to 10% continuing into next year.
According to Geordan Murry, Housing Industry Association senior economist, 2019 could see a peak in new apartment completions, after significant contraction is giving potential buyers more choice, as reported by domain.
Mr Murry pointed to a boom in detached housing which would likely peak before slightly falling this year, adding that new supply in housing is needed as rental vacancies are currently low.
‘It’s still a lot of people arriving in Victoria, particularly Melbourne, and that’s a lot of people that need a roof over their head,’ Mr Murray stated.
Property markets lesson to buyers and sellers
Despite weaker housing conditions, buyers still need to do their research to ensure they have the best deal, according to Amanda Jones, a Cohen Handler agent.
‘Buyers still have to really know how to negotiate after an auction,’ she said.
‘Just because it gets passed in or it doesn’t sell, they think they’re going to get a bargain.’
So what does this mean for home owners, wanting to sell? Well…you could take comfort in the fact that, despite declines looking to possibly surpass those seen in the GFC in 2008, it is only possible because of the massive gains we have experienced.
Correction is always bound to happen.
Off-market opportunities could be something to look into, as the housing downturn digs its heels, which we have seen.
Here homes that aren’t publicly listed for sale can be shopped around, allowing a less aggressive approach than traditional auction.
But one thing you can expect for housing prices this year is changes to owner’s corporation laws. With benefit’s leaning towards residents — according to Robyn Waters, president of Real Estate Institute of Victoria.
A Labor victory at a federal level in our next election, could see tightening to negative gearing as well as capital gains tax breaks, as was reported by Domain.
This is reflected in the current uncertainty in the property market, and the way people are sitting back in a ‘wait and see’ attitude.
Property Council of Australia Victorian executive director, Cressida Wall, had this to say:
‘I think people are waiting to see what’s happening to the market in a number of ways. So they’re holding off buying, in some cases.’
And unfortunately investors will have to do much the same.
More to come!
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