2020 is likely to be a very good year for property.
The Australian property markets are in a self sustaining recovery according to recent commentary from Westpac.
The recovery in Australian dwelling prices that began in mid-2019 accelerated in the final quarter, sustained a robust pace into year end.
This time last year prospects looked bleak with property for our property markets with sharp price corrections in Sydney and Melbourne and weakness was starting to spill over to other markets.
But the CoreLogic home value index, covering the eight major capital cities, rose 1.2% in the Dec month following a very strong 2.0% gain in Nov and a 1.4% rise in Oct, giving a 4.7% gain for the final quarter.
Prices rose 3% for the year as a whole – a 7% rebound in the second half more than offsetting a 3.8% decline in the first.
Nationally property values have recovered just over half of the 2017-19 correction.
They are still 3.9% below their 2017 peak but at the current pace will regain that level by mid 2020.
Several factors contributed to the turnaround in 2019 including: reduced uncertainty around housing-related tax policy following the Federal election; 75bps in official rate cuts from the RBA; and some easing in regulatory guidelines around loan serviceability assessments.
In their latest Housing Pulse Westpac gave the following commentary:
Australian property markets are finishing the year with the proverbial ‘wet sail’, price gains accelerating, sales picking up and new listings starting to lift.
This time last year prospects looked bleak with property sales dropping sharply, price corrections worsening in Sydney and Melbourne and weakness starting to spill over to other markets.
Turnover as a share of the total dwelling stock finished 2018 at a 31yr low with 70% of all properties recording annual price declines.
Our November 2018 Housing Pulse noted buyer sentiment was stabilising but that other factors looked to be driving the weakness, including an apparent tightening in lending standards.
The poor finish carried into the start of 2019 with the prospect of a more pronounced housing-related drag on the wider economy contributed to our decision to review our RBA view in February, Westpac becoming the first major bank to call rate cuts in 2019.
The RBA moved to a clear easing bias in the following months, eventually making three 25bp rate cuts in June, July and October.
The reduction in rates, reduced uncertainty around housing-related tax policy following the Coalition victory at the May Federal election, and some relaxation in regulatory guidelines for home loan serviceability assessments contributed to a dramatic turnaround since mid-year.
The rebound has been particularly sharp for prices which look set to finish up 2.4% for the year, a remarkable turnaround given the 3.8% fall over the first half.
Turnover, new listings and dwelling approvals are also lifting but remain at weak levels overall.
All capital cities except Perth and Darwin recorded gains in Dec, as did most regional areas within states.
The resurgence continues to be strongest in Sydney and Melbourne, which recorded more material price declines in 2017-18 and stronger gains in 2013-17.
Sydney recorded a 1.7% rise, a strong result but down compared to the thumping 2.7% gain in Nov.
Prices are up 10% from their May 2019 low but 6.4% below their peak in mid-2017. Houses and top and middle tier properties continue to outpace units and lower tier properties.
More detailed sub-regional data to Nov show unit prices have been softer in Parramatta and some outer suburbs, recording little or no change since mid-year – signs of a ‘two tier’ market reflecting both new supply and buyer concerns about building quality.
Melbourne recorded a 1.4% rise – solid, but as with Sydney, more subdued than the 2.2% rise in Nov which followed a 2.3% gain in Oct.
Melbourne prices are 2.3% below their 2017 peak.
Brisbane dwelling prices posted a solid 0.7% rise, similar to the 0.8% gains in Oct and Nov and lifting annual growth into slight positive for the first time since Dec 2018.
The 2.4% gain in Q4 is the strongest quarterly price move in over a decade.
Across the other capital city markets:
Perth posted a flat result in Dec following a 0.4% gain in Nov, prices steady for the quarter but still down 6.8%yr.
Adelaide prices rose 0.5% but are still down slightly over the year (–0.2%yr).
Canberra and Hobart recorded slight gains to be up 3.1%yr and 3.9%yr respectively.
Darwin continued to see price slippage, a 0.5%mth decline leaving prices down –9.7%yr.
Seasonality does impact prices heading into year end – adding about 0.1ppts in Nov and shaving about 0.2ppts off in Dec.
As such, we should not read too much into the Nov-Dec pattern in monthly growth.
The picture instead is one of robust underlying momentum with the latest update on turnover (including revisions to recent months) now showing a clearer lift as well, albeit off extreme lows.
That said we continue to expect momentum to slow in 2020 on a lift in supply initially and then as affordability constraints re-emerge.
Positive Momentum for 2020
Momentum heading into 2020 is clearly positive, albeit uneven across markets.
Near term, the main guidance comes from current price momentum, auction markets, listings and our buyer sentiment measures.
Nationally, these are all showing positive prospects for early 2020 with price growth accelerating, auction clearance rates riding high in Sydney and Melbourne, listings showing a clear tightening and a positive pulse from buyer sentiment pointing to a further lift in demand.
The cyclical momentum is strongest in Sydney and Melbourne but is also showing a notable pick up in Brisbane.
Adelaide and Hobart are seeing a more muted lift with Perth yet to pull out of its multi year price decline.
Source: Westpac Housing Pulse
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