Those of us in the industry have been pointing to it for some time – a convergence of factors that will reboot a tired market into a new growth phase.
Get ready because the signs are everywhere that time is now, and the pace will only pick up.
Over the past few months, the mood around Australian property has turned a corner, with experts across domains suggesting robust days ahead. In Victoria, we’re seeing it first hand.
What’s driving that sentiment shift? A convergence of factors:
- Record low interest rates
- Relaxed lending criteria
- Price stabilisation and rises in key markets
- Increasing auction clearance rates
- Property friendly Victorian 2020 budget
Record low interest rates
Australia’s Reserve Bank has lowered rates consecutively for May and June – to 1 per cent.
It’s the first back-to-back cut since 2012 and, more significantly, the lowest rate in history. The drop is expected to generate a flurry of renewed energy from buyers and investors alike. Further rate cuts have not been ruled out.
Relaxed lending criteria
The Australian Prudential Regulation Authority (APRA) has proposed a relaxation of bank lending rules to make it easier for buyers to access borrowing funds when their applications are being assessed.
The changes are recommended to reflect updated conditions since the current rules were introduced in 2014 to manage wider market risks at the time.
The proposals are currently being reviewed and are in the consultation process. Even if a modified reform is put into place, the result is likely to open up new financial capacity in the market and stimulate further activity.
Price stabilisation and rises in key markets
June results showed home values in Melbourne heading upward for the first time since 2017 to a $619,383 median. Prices elsewhere are stabilising and enjoying numbers they haven’t seen for some time.
Previous declines appear to have been arrested and a number of key data points are pointing to a critical turn around the corner. The ‘bottom’ of the market seems to have passed by and the window will close fast for investors looking to capitalise on bolstering confidence.
Increasing auction clearance rates
Auction rates for property soared their highest in over a year after the recent Australian federal election. Clearance rates (how many properties are succesfully sold at auction) are a good indicator of market health, and they have now topped 60 per cent for three weeks in a row according to Core Logic.
The Melbourne clearance rate was up to 70.6 per cent – signalling a returning confidence with buyers and investors alike.
Property friendly Victorian 2020 budget
Victoria handed down its Budget in late May, with all signs pointing to growth.
The state’s record population continues to climb, driving housing demand, and a strong $25.8 billion AUD commitment to boost state transport will help high growth locations stay connected.
The Budget also committed $671 million to build 17 new schools to accommodate a surge in new students; again with a focus on high-growth, non-metro areas such as Eynesbury (whose primary school received its go ahead).
Read more: Victorian budget 2019-202 – property outlook
This all adds up to an extremely ripe time for property investors. In my experience, when the market starts to accelerate, it doesn’t wait around. Now these key conditions have begun to converge, I would expect the pace of good news to pick up speed.