HOUSING MARKET UPDATE

Whilst the last 12-18 months has seen some highly challenging conditions for vendors, several recent developments suggests the property market could be about to start trending positively.

The biggest weight on the market has been tighter lending regulations, with increased compliance, restrictions around investor & interest only lending, as well as banks needing to increase the level of household expenditure in their serviceability calculations. This has led to a smaller pool of potential buyers and has seen prices falling consistently, particularly in the larger Sydney & Melbourne markets.

However, there seems to be continued positive news that could see the beginning of an uptick, given three recent market changes:

1. Firstly, the RBA’s announcement of a 25 bps reduction in interest rates has given the market a degree of buoyancy, with prospective buyers more confident they can afford  the ongoing repayments
2. There will be no changes to negative gearing or capital gains calculations. Labor’s much-publicised changes would have again reduced the pool of buyers in the secondary market, leading to much concern about what impact this would have on the market. To a degree, this had already been ‘priced in’, so an organic improvement can be expected.
3. A recent decision from mortgage regulator APRA for banks to reduce their assessment rates suggests banks will be able to lend more to prospective borrowers. At present, banks need to assume repayments for any loan will be at least 7.25%, which is approaching 4% more than what most clients are actually paying. Thankfully, the regulator has seen sense and given the green light for banks to reduce this figure.  Along with the regulators removing restrictions around investment and interest only lending, there is more appetite to get buyers into their homes.

We do want to see concrete house price data to support the positive sentiment, but application numbers have increased and we hope to see a better finish to 2020