As we head into the last quarter of 2019, predictions about the property market in 2020 have been pouring in. Some of these paint a rather rosy look of prospects in the next 12 months – so rosy that they may be too good to be true.

A number of news headlines this week report “a return of the housing boom” citing high auction clearance rates of over 70% in capital cities like Sydney, Melbourne and Adelaide. However, a closer look may tell a different story.

“Last September 7, in Sydney, Melbourne, Brisbane, Canberra and Adelaide, the difference between the industry released clearance rates and the truth averaged 47%,” explains Neil Jenman of Jenman Support.

“In Melbourne, there were 704 auctions of which 411 sold at auction. That’s a truthful clearance rate of 58%. The industry claimed a clearance rate of 74%. In Sydney, there were 444 auctions of which 281 sold. That’s a truthful clearance rate of 63%. The industry claimed a clearance rate of 82%.”

The danger with these claims, Jenman says, is that mainstream publications are carrying these predictions and giving them legitimacy.

“The Australian Financial Review carried a front page story about how the ‘RBA’s cheap money is firing up property auctions.’ The newspaper regurgitated the false figures from the real estate industry.”

Other factors suggesting that things aren’t as rosy as they may seem in the property scene are the stagnant unemployment rates in the country, sluggish wage growth and the lowest GDP growth rate observed in a decade. In fact, GDP growth per capita has gone into the red – all the more reason for prospective investors to move with care in the market given the weakness in the economy.

Some may point to the low interest rates as a positive, but Metropole Property Strategists CEO Michael Yardney notes that it’s not at all indicative of strong performance, with lending restrictions constraining the market.

“I would expect our major capital city property markets to deliver capital growth of around 4%-5% in 2020, even with the expected two further interest rate cuts. There are too many headwinds – particularly tighter lending criteria despite lower interest rates,” he explains.

“Sure, APRA’s rent lowering of the interest rate floor has eased credit constraints slightly, but the banks’ more restrictive treatment of expenses and the implementation of full ‘comprehensive credit reporting’ from September this year are likely to offset this easing.”

Yardney notes that while interest rates are being lowered by the RBA to improve unemployment and boost inflation, “the last thing they want is another property boom”.

Credit availability is expected to tighten again once dwelling prices start soaring and the trends observed in the market over the spring will say a lot about where the property market is going in 2020 – but it may be much too early to say that we’re returning to a boom period.

Therefore, investors should keep their expectations tempered, even when the reported numbers look promising.

“Historically, these levels of auction clearance rates in Melbourne and Sydney have been consistent with annualised house price growth in the order of 15%-20%. However I don’t think this level of price growth will occur this time round,” Yardney concludes.