Australia's housing markets have clearly turned the corner.
Buyers are back making plans, looking at properties and approaching their lenders for finance.
They are buoyed by falling interest rates and the prospect of more rate cuts to come and a generally positive media.
Sellers are slowly returning to the market encouraged by rising prices.
Clearly our housing market are responding to lower interest rates as well as the recent loosening of loan serviceability rules from APRA and the positive influence of the stable federal election outcome.
As a result, auction clearance rates are up, asking prices are up, and some property commentators even forecasting double digit capital growth next year.
Now we called the market bottom a few months ago in our regular Property lnsiders video chats
So to understand what’s really happening in our property markets and to hear the forecast of what’s ahead, watch Michael Yardney chats with Australia’s leading housing economist – Dr. Andrew Wilson, chief economist of MyHousingMarket.com.au
Watch as we discuss this month’s news:-
Another interesting month overseas
• US Trade Wars – these are continuing with Donald Trump announcing a raft of new tariffs in August. Damage from the worsening US-China trade war is beginning to weigh on the world's biggest economy, with American manufacturing contracting
However with the next round of Presidential elections in 2020, Trump is going to want to go into that campaign with strong jobs growth and the US economy in good shape. So it’s likely Trump is going to look for a resolution to this issue sooner rather than later
• The Brexit saga: The Conservative Government lost its majority in Parliament and the new Prime Minister has proposed a call for a general election, which is likely to pass with support from Labour. With an election now set to be fought ahead of the 31 October Brexit deadline and with Johnson’s conservative party polling well, the likelihood of a no-deal Brexit has risen.
Australia’s economic growth is slowing
The latest national accounts data show that Australia has recorded very weak economic growth - GDP growth slowed to 1.4 per cent in the year to June, well below the federal government's May 2019 Budget forecast of 2.25 per cent growth.
Interest rates are going to drop further.
This month the RBA decided to leave the cash rate unchanged at 1%.
The markets have factored in another rate cut in October or November so I can imagine the RBA did not want to spook the market by dropping rates this month.
It looks like the RBA is going to be challenged by its intentions as it will take a couple of years before it can get inflation to within this target range and unemployment down to the levels it is hoping for.
Interestingly lower interest rates haven’t stimulated employment or significant economic growth overseas, so they are not likely to have the result the RBA hopes for here either.
Auction clearance rates point to higher prices ahead.
Auction clearance rates in both Melbourne and Sydney kept rising over the last month continuing the post-election bounce in confidence in our property markets.
The prospect of easier access to finance, falling interest rates and a tax cut has boosted confidence, driving strong auction results across Australia.
However the number of properties offered for auction was once again low this weekend, but with these types of results more sellers are likely to be prepared to place their properties on the market.
What’s happening to Asking Prices?
While median prices are often seen as the gauge of how the market is performing, these are a lagging indicator, demonstrating what happened a couple of months ago.
Asking prices are a more timely leading indicator, and they confirm that property prices are rising around Australia
What’s ahead for property prices?
Overall property values are likely to rise modestly to the end of 2019 before growing about 3- 5 per cent in 2020.
It’s a great time to buy countercyclically in Sydney and Melbourne and ride the property next wave of the property cycle in Brisbane.
The downside for these capital city markets is minimal and there is now plenty of upside ahead over the next few years.
The rental markets
Our rental markets are still relatively flat, but vacancy rates are falling and rents will slowly creep up.
With thanks to PropertyUpdate.com.au and MyHousingMarket.com.au