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Published On: Tue, Jan 22nd, 2019

What Will Happen to the Aussie Housing Market in 2019

There is no doubt that 2019 will be an interesting year for the Aussie housing market. We have the banking royal commission, low interest rates, a property bubble and a population with high debt and rising costs. What a melting pot of fun it is!

Image/CIA

Interest rates

We can likely assume that interest rates won’t see a considerable increase this year. National accounts are low, so the RBA will lower its growth forecasts with many economists stating the rate hike is a 2020 issue.

The job market and economy are doing ok, and wages are even, very slowly, on the rise. This all means that the property market is not under any immediate threat.

The difficulty in lending

The banking royal commission has had a massive effect on the way lenders lend and caused tighter credit conditions. Recently, however, banking regulator APRA has loosened lending restrictions with Reserve Bank trying to ease the fear instilled in banks from the royal commission.

The royal commission, however, was a good thing. It exposed the poor ways in which these financial institutions operated, their weak-excuse for banking conduct and the sheer amount of irresponsible lending that took place. None of these things were helping the community at large.

The lending crackdown is simply the correct operation that banks should have been using this whole time through proper loan assessments.

Prices will continue to drop

The royal commission has created more hurdles for lending which means prices will continue to fall due to descending pressure on values.

Sydney and Melbourne will see many more developments, especially in the apartment sector, as will Queensland. The El Dorado in Indooroopilly is a perfect example of the kind of developments we will see more of.

China and the US are seeing a dip in their prices which will flow on to Australia with further price falls expected in Sydney and Melbourne.

How much lower?

The great debate over housing forecasts has changed from “will they drop?” to “how much will they drop by?” The CBA claims the drop will start to slow saying we are two-thirds of the way done.

It is important to remember however that the population growth offsets the rise in apartment growth. Still, many say we are not expecting a property crash, but many developments will be sold lower prices than initially expected.

People will focus on saving

Considering our most significant assets are diminishing in value, people will likely turn to a focus on their savings. A slowdown in the household sector means that key economic forecasts which affect the budget will be in question. The nation’s first surplus in a decade is expected.

The proposed changes to negative gearing and capital gains tax will be much harder to get over the line if things continue the way they are headed.

One thing we can be very sure of is that weekly auction results, and monthly house price reports will be of great benefit to watch as 2019 gets underway. It is an interesting time for the Australian housing market indeed.

Author: Chris Tomlinson

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