The Melbourne and Sydney property markets have surprised most commentators with the strength of their resurgence.
Well…even stronger price growth according to SQM Research’s annual Housing Boom and Bust Report which suggests that most of Australia’s capital cities will benefit from the interest rate cuts and loosening of credit restrictions to record dwelling price rises over 2020 with Sydney and Melbourne leading the charge.
SQM’s base case forecast is for dwelling prices to rise between 7% to 11%, which is a strong bounce back from the price falls recorded over 2018 and the first half of 2019.
Sydney and Melbourne will drive the rises.
SQM forecast Sydney property values to rise between 10% to 14% and Melbourne property prices to rise 11% to 15% next year
Other cities are also expected to record price rises.
Source: Christopher’s Housing Boom and Bust Report 2020
Their base case forecasts assume no changes in interest rates and, importantly, no intervention by the Australian Prudential Regulation Authority (APRA).
This base case also assumes a recovering Australian economy that has responded to the rate cuts of 2019 and reduced international trade tensions.
One that is also been driven by ongoing strong population growth rates.
The Brisbane property market will benefit from the recovery in mining investment and should record price rises in the order of 3% to 6%.
Perth will finally bottom out.
As a result of the improved international outlook and an existing recovering in mining investment, the city of Perth will finally record price rises next year after a prolonged housing downturn.
The forecast is for Perth dwelling prices to rise between 3% to 6%.
Darwin is the only city expected to record price declines.
The forecast of for prices to fall between -2% to -5%, as the Darwin economy continues to struggle and excess stock for sale continues to weaken the local market.
The sharpest turnaround on record
The Sydney and Melbourne housing markets have recorded a sharp turnaround in the 2nd half of 2019 following on from the surprise result of the Federal Election, interest rate cuts, the loosening of credit restrictions and ongoing strong population growth rates.
SQM expects these factors to drive the national housing market into 2020.
In a close call, APRA is expected to not immediately intervene despite the strong price rises according to the report.
However we have some misgivings on the sustainability of this new recovery.
Sydney and Melbourne are rising from an overvalued point according to the report.
Long term, our two largest housing markets look vulnerable and forever reliant on cheap credit.
Housing debt, while falling compared to GDP over 2019, is still very high.
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