- by Doug Daniell
- in Economy Finance Property Investment Property Market Updates Wealth Creation
Expect strong capital gains and property market growth in 2020 as home values surged to its highest in 10 years over the past three months.
CoreLogic’s Home Value Index showed that the last quarter of the year 2019 was the fastest quarterly growth in a decade. Analysts put it down to low mortgage rates and easier lending policies, factors that are both expected to continue this year.
But while the monthly capital gain trend remains fast, December shows a slowing down in pace when compared to the capital gains in the previous two months.
Driving the highest capital gains are Sydney and Melbourne. Fueled by the demand of top-end buyers willing to pay more just to get in the property market because of low stock levels, these major cities continue to lead the growth. The rate of growth, though, slowed down to 1.7 per cent and 1.4 per cent in Sydney and Melbourne respectively.
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In Canberra, home values grew by 0.1 per cent after its 1.6 percent growth in November.
In Perth, values flattened in December, and in Brisbane it jumped down to 0.7 per cent from 0.8 per cent previously.
The combined capital gains in 2019 increased by 3 per cent, in huge contrast to the 6.1 per cent decrease in 2018.
But though the rapid turnaround that began in the second half of 2019 is expected to persist nationwide through 2020, property market analysts fear that it may not be as strong. They see two reasons for this: affordability issues and supply.
Affordability and Listings to Affect Property Market Growth
When house prices are rising rapidly, homes become very unaffordable. So the growth, while good, the swiftness of it all that creates record-high house prices within a short period of time might take affordability away from first-time buyers and home upgraders, particularly when wages are slow to rise.
In fact, CoreLogic’s Asia Pacific head of research, Tim Lawless, said that the soft growth in December is likely due to worsening affordability issues.
Affordability problems will slow down growth as first-time buyers pull back and fewer people are able to get in the property market.
Another factor that will possibly slow the property market is the large number of people listing their homes in an effort to take advantage of the rising prices and huge capital gains.
Strong selling conditions resulting to higher listings may dampen property market growth and constrain rapid growth in prices.
But all in all, property market in 2020 looks good with strong capital gains not just in Sydney and Melbourne but in other places as well.
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