As pointed out very dramatically in other property news outlets, the recent housing slump “has been the longest and deepest property downturn in modern history“. That’s quite a header but they do back it up with some reasonable facts at least.
While the combined capital city market values are down just over 10% from their peak, Sydney property values have fallen 14.9% and Melbourne property values 11.1% from their peaks around two years ago.Property Update
A 15% fall over a year or so is a pretty hefty chunk of cash to loose, especially when you’re talking about valuations usually in the million+ when it comes to Sydney! Despite this quite brutal beating however, many publications are now talking once again about the market “picking up“. As such it can be tempting – especially for new home buyers – to want to jump in and finally buy a house.
Some Positive Signs
While this talk of ticking up might be mostly wishful thinking, there are some positive signs that could help see prices rise once again. It’s no secret that there’s many new home buyers out there eagerly waiting for prices to come down so that they can afford their first home.
So in Melbourne and Sydney at least prices may have reduced just enough for many to pull the trigger. Interest rates have also recently been cut which always spurs mortgages and makes things easier to finance.
Economist Trent Wiltshire forecasts that property prices are likely to stabilise in Australia’s capital cities by the end of the year and will then exhibit moderate growth in 2020 in Domain’s mid year property report.
The always highly touted auction clearance rates have also made a slight bounce back showing at least some healthier signs of life. Whether or not they’ll continue to rise, remain the same or dive back deep down again is anyone’s guess but this metric is usually a good indicator of the general publics ability and willingness to purchase properties.
Add to all this the constant barrage of property propaganda from the major news outlets and one could be easily convinced that Australia is on the cusp of another huuuuge property boom!
Many Negative Signs Too
Not having a vested interest in selling property *cough* Domain *cough*, I’d also like to present to you the other side of the argument here. With a more critical eye it really doesn’t take much to poke holes in many of the forecasts out there.
In the same body of text they’ll say that “consumer confidence is rising” and then go on to casually mention how “our economy is languishing“. They mention interest rates being reduced as a positive thing… even though this is commonly done to help stave off a recession, which is exactly why the US has just dropped their rates too.
On top of these things there’s other, much more disturbing long term trends that seem to indicate what we’re seeing now – a bit of stability – might actually just be the eye of the storm if you will.
Building approvals as pointed out by Who Crashed The Economy has all but fallen off a cliff when looking at the 12 month rolling average. This is the case for virtually every state in Australia too with the only exception being Victoria.
The repercussions for this is that they’re predicting more than 100,000 jobs might be lost as there won’t be any new buildings to build over the next few years, thus impacting construction businesses.
There’s also serious signs that investors aren’t biting anywhere near as much as they used to with the number and value of investor mortgage loans also plummeting.
Given how high most property prices still are and that regular home buyers don’t usually speculate on their primary place of residence or get into a buying frenzy, it’s quite logical to assume that first home buyers or existing owners aren’t going to be pushing up property prices any time soon.
Somewhere In Between…
Like with most optimist and pessimist arguments reality often lands somewhere in between meaning both of them are right in some form or another. It’s unlikely that the Australian property market is about to plunge into deep, deep darkness nor is likely to take off again into the double digits.
My own personal view – and I encourage you to review the above facts and form your own opinion – is that while the future will fall somewhere in between… it’s more likely to fall either flat or into the negative domain.
This is also all assuming the rest of the world continues on with it’s decade long boom and we don’t have the USA, Europe, China or all three going into their own recessions! While a lot of people root for “a huge property crash” here in Australia so they can access cheaper property prices it’s unlikely they’d benefit from such a crash due to the simultaneously crashing economy.
For now I think the best result is either stagnation or a very slow decline in prices. This way housing affordability is slowly increased whilst at the same time continuing to allow the economy to function and possibly even grow.
But what do you think? What signs good or bad have you seen that housing is recovering/crashing lately? Let us know in the comments below!
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