What’s ahead for property in 2020

Article by Tim Lawless, Michael Yardney’s Property Update 

Source: Property Update

January 8, 2020

 

In 2020, it’s unlikely we’ll see such a rapid rise in capital gains as seen throughout the second half of 2019 despite the expectation that mortgage rates will move lower over the first half of the year; several factors are likely to act as counterweights to this stimulus.

 

Housing values are expected to rise through 2020 across most regions, however, the year may bring about a change in the growth dynamic with the larger cities seeing a slowdown in the rapid rate of growth recorded through the second half of 2019.

 

In contrast, smaller capitals such as Brisbane and Perth, as well as key regional centres and lifestyle markets could see an improvement in conditions as buyers are attracted to affordable prices coupled with job opportunities and lifestyle factors.

 

December property values

Values are rising faster than incomes.

 

With housing values rising faster than household incomes, worsening housing affordability is likely to deliver a slowdown in activity across price-sensitive segments of the market, especially in Sydney where dwelling values were already 8.2 times higher than gross annual household incomes halfway through the year.

 

A rise in investors, attracted by prospects for capital gains and a positive spread between mortgage rates and rental yields, should help to offset a reduction in activity from more price-sensitive buyers.

 

A surge of new apartments

 

New high-rise apartment completions are likely to remain higher than average over the first half of 2020 as the surge in off-the-plan unit projects complete construction.

 

Precincts with higher supply levels could face some downwards price pressures as new stock enters the resale market, especially at a time when many buyers are cautious of newly built projects due largely to concerns around high supply levels and construction quality.

 

More Stock 

 

Advertised stock levels are likely to rise from their low base at the end of 2019 as prospective vendors take advantage of the recovery in home values and strong selling conditions throughout spring and early summer.

 

Higher advertised stock levels will provide more choice for buyers and remove some of the urgency from the decision-making process that has supported higher prices.

 

Smaller cities where housing is more affordable and economic conditions are improving may offer some insulation from these downside factors.

 

Job growth slowing

 

Jobs growth and population growth is slowing across New South Wales and Victoria, whereas conditions are improving in Queensland, Western Australia and, to a lesser extent, South Australia.

 

Comparatively low housing prices, coupled with higher migration rates and improving jobs growth, could play out positively for the capital cities in these areas.

Sydney Melbourne Brisbane property markets

Advertised stock levels are likely to rise from their low base at the end of 2019 as prospective vendors take advantage of the recovery in home values and strong selling conditions throughout spring and early summer. Higher advertised stock levels will provide more choice for buyers and remove some of the urgency from the decision-making process that has supported higher prices.

 

Smaller cities where housing is more affordable and economic conditions are improving may offer some insulation from these downside factors.

 

Jobs growth and population growth is slowing across New South Wales and Victoria, whereas conditions are improving in Queensland, Western Australia and, to a lesser extent, South Australia.

 

Comparatively low housing prices, coupled with higher migration rates and improving jobs growth, could play out positively for the capital cities in these areas.