Whilst most welcome a recovery in the housing market, few believe that another boom fuelled by more debt is sensible or desirable.
The boom like conditions are not necessarily being felt throughout Melbourne either. Inner-city housing and the middle-ring suburbs seem to be performing the strongest.
There were three significant events that turned the market:
Negative gearing – The markets unease with the potential impact of removing negative gearing was apparent in the 6 to 12 months lead up to the election. Once it became clear negative gearing would remain in place, buyer and investor confidence returned almost immediately.
Credit conditions were eased in the days after the Federal election.
Interest rates – Rates were cut in June, July and October. By late November, RBA Governor Philip Lowe hinted at more cuts to come and even money printing if Global events dictated it.
Many commentators are already speculating as to whether and when APRA, the bank regulator, will intervene to protect the market from overheating. Although we welcome the recovery, some credit tightening in over heated markets could be the best course of action.
It’s not easy predicting the timing of the property market particularly when governments globally are determined to inflate their economies and are manipulating their markets by trying to artificially inflate them by flooding them with more money and lower interest rates.
Forecasts for the Australian property markets in 2020 are overwhelmingly optimistic with the Commonwealth Bank, HSBC, SQM Research and others forecasting a year in which there will be strong growth in prices in most of Australia’s major markets. The forecasts are based on the assumptions that the cash rate stays on hold, the economy recovers, and APRA does not intervene until late 2020.
The reality is no one knows how 2020 will unfold. If 2019 is anything to go by, it shows the market can experience both bust and booming conditions within a short time frame.
Hopefully our miracle economy keeps producing more miracles.