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The Agency predicts steady house price growth in 2020

A combination of cheap funding and low stock levels are helping boost house prices across the country and that is expected to continue into 2020, according to real estate group, The Agency.

In their Summer 2019/2020 property report, The Agency CEO Matt Lahood has suggested there could be more upside in house prices next year, despite supply levels slowly starting to catch up with buyer demand.

“Our prediction for next year sees this buoyed property market activity continuing with available stock levels rising next year as homeowner confidence grows in response to the current buyer depth and competition in the market,” Mr Lahood explained.

“While there has been a range of reports released citing large house price growth in 2020, we foresee a steady market with modest price growth.”

Mr Lahood noted 2019 was a tale of two halves. Early in 2019, prices and consumer sentiment where being weighed down by a looming federal election that could have seen negative gearing tax exemptions wound back. Meanwhile APRA still had both lenders and borrowers facing tight restrictions.

Mr Lahood believes that over the last quarter, prices really started to turn the corner when those two factors changed along with the sharp fall in interest rates.

“The market has experienced a mini-boom in both Sydney and Melbourne, by the close of November 2019, Sydney house prices jumped by 6.2 per cent and Melbourne by 6.4 per cent over the quarter, according to CoreLogic.

“Over the same period, home values across the combined capital cities increased by 4.6 per cent, with every capital except Perth and Darwin experiencing growth. In good news though, the rate of decline has slowed in both these cities and Perth experienced a price rise of 0.4 per cent during November.”

The Agency CEO feels that while Perth and Darwin have been hit hard of recent years, they are now starting to present an appealing value proposition for investors.

“While Perth and Darwin have not experienced the same ‘mini boom’ in terms of price growth over the last quarter, they are proving to be attractive markets in terms of rental yields for investors. In particular, we are seeing an increase in investment in the Perth market from the east coast of Australia, with investors taking advantage of the attractive property prices.”

Across the country, sentiment is really strong at the moment and buyers are getting more aggressive.

Sydney
In Sydney, prices could keep moving higher thanks to strong demand and low stock levels according to Thomas McGlynn, The Agency’s National Head of Sales and Chief Auctioneer.

“Our view is that the impressive growth Sydney prices have experienced since July 2019 is a result of limited supply colliding with increased demand.

“It’s a good time to sell but sellers who are fair with their price expectations will engage more buyers and create even more competition, leading to a potentially higher sale price,” Mr McGlynn said.

Melbourne
The Agency’s General Manager Victoria, Peter Kakos, believes there is new market confidence being driven by first home buyers, and their re-emergence is creating a “domino effect”, reinvigorating other segments of the market. 

“First home buyers are back in the market, encouraged by incredibly low interest rates and easier access to finance,” Mr Kakos said.

“There’s a flow-on effect because new home buyers are prepared to make a stronger offer on an apartment, the owner of that apartment then has the money and confidence they need to trade up to a semi. The semi owner moves onto a house. This brings the whole market to life.

“In January the market usually slows. However, we’re seeing people who want to sell in 2020 locking in their properties for auction earlier than ever.

“These are people who have noticed the late spring resurgence and are looking to capitalise on the pent-up summer demand.”

Perth
Over the past 12 months to December 2019, Perth has once again experienced challenging property conditions. However, Stuart Cox, The Agency’s WA General Manager, believes the market has plateaued and is entering a new, more positive growth phase.

“These are all indications that the Perth property market has turned a corner,” Mr Cox said.

“While we don’t expect to see the same level of growth the capital cities have been experiencing on the east coast, we do expect 2020 to be the year Perth property returns to the black.”

Mr Cox has observed an uplift in savvy buyers getting into the market recently, particularly investors, who have identified the tangible value in Perth residential property. 

“These buyers are especially obvious at the lower end of the market where they’re taking advantage of rising rents and increased yields,” he said.

Gold Coast
It has been a relatively strong year for Gold Coast property with much of this growth being driven by families and downsizers.

The Agency’s National Head of Sales and Chief Auctioneer, Thomas McGlynn, has observed the past three months have been particularly positive for the Gold Coast property market.

“We’ve seen that lower price points on the Gold Coast are performing well because they represent real value compared to most of the country. We have also seen increased confidence in the market with some significant sales.

“Because of this, sellers need to be mindful of setting prices that truly demonstrate value. It doesn’t pay to be overly confident in this type of market. The best way to achieve good results can be to start with lower expectations and let the market push it higher.”

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