If you ever followed the stock market you’d know that stocks don’t go up continually in a straight line. When a stock has a big upward change in price, you know that at some point it must retrace or at least go sideways for a while. This happens in order to consolidate price increases. And it’s likewise with the property market.
Melbourne prices fell in 2018 and early 2019, but when you look at the graph below you can see how prices have moved over the long term. The graph illustrates the price movement of property values in Melbourne over the last 40 years, from less than $50,000 in 1980 to $700,000 at the peak of the market in 2017.
When we put the recent falls into context, the price falls from the peak of 2017 to where they are today, are still nearly double what they were 10 years ago. And more than 15 times higher than they were 40 years ago. Keep the big picture in mind because over the long term house prices have kept going up. Yes there will be corrections along the way, but population growth with improved infrastructure will take house prices higher over time.
It was the introduction of lending restrictions by APRA, followed by the tighter lending standards applied to loan applications as a result of the Banking Royal Commission, that was the prime reason for the downturn in the market.
But since the Coalition government won the Federal Election there’s been a number of changes which have improved consumer sentiment and confidence:
- APRA has instructed the banks to ease up on their lending restrictions
- Lower interest rates are on their way
- The removal of the fear of changes to negative gearing and Capital Gains Tax
- First home buyers can now buy with a 5% deposit
- Tax cuts to almost 10 million workers
- Big infrastructure project commitments by both State and Federal governments
Collectively all these changes will stimulate the market. As credit starts to loosen up, as it inevitably does every property cycle, prices are set to go higher than most people anticipate. As we stated previously, all property slumps are temporary, while the long term increase in property values is permanent.
This is a time of great opportunity, yet it is not easily recognised and will be missed by many buyers