Sydney and Melbourne aren’t waiting for another cash rate cuts to boost its property market. Experts predict these cities are poised for growth and will achieve at least two digits house property price increase early next year. So, if you’re thinking of buying a property, this year might be the best time.
SQM Research managing director Louis Christopher confirms both cities have been building their momentum since May’s federal election.
Mr. Christopher said indicators of a growing market, such as dropping stock levels, escalating auction clearance rates and asking prices are already present. Factors that are all important if you’re looking into buying a property.
He said, “I’m not ruling out a new housing boom,” he said. “We have low-interest rates and loosening of credit restrictions. I’m increasingly confident that we’re going to see double-digit growth in Sydney and Melbourne, even without another rate cut.”
He expects the house property price increase to happen next year with a two per cent growth in Sydney in the current quarter and a four per cent increase in December quarter.
According to SQM’s research experts, asking prices have gone up 5.6 per cent after bottoming a week before the federal election on May 18. Melbourne marginally increased while Brisbane has remained stable.
On the other hand, although CoreLogic director Tim Lawless sees a general improvement in housing conditions, he does not share the same view.
“We haven’t seen any evidence that housing values are about to embark on a rapid growth phase, at least from a macro perspective.”
He said Sydney and Melbourne are clearly the first cities to respond to mortgage rate adjustments, including changes in credit policies as well as the public confidence in the government after the election.
“More recently, it looks like the pace of capital gains is accelerating in Sydney and Melbourne,” he said.
“We are expecting to report a monthly increase in excess of 1 per cent across both cities when our August indices are finalised on Monday next week.
“If this is the case it will be the highest monthly growth rate since early 2017 across both cities.”
So, if you’re buying a property next year, Mr. Christopher added a caveat saying the house property price increase expectations could still change with the worsening global sentiment.
“If we’re going to enter into a global trade war and it gets nasty, it will be a significant risk for the Australian economy and it will have an impact on a number of fronts,” he said.
“The upside risk is that we’ll get another interest rate cut into this upturn, which could create a potentially dangerous new housing boom and the regulators may step in to restrict credit growth once again.”
The potential increase in stock will also play a role and get in the way of the market returning to double-digit annual capital gains.
“There is a high likelihood that advertised stock levels will ramp up substantially through spring and early summer,” Mr. Lawless said.
“At the moment, advertised stock levels are extremely low, creating some competition and urgency among buyers.
“The influx of freshly advertised properties through spring could work to quell some of the momentum that is gathering in the market if buyer numbers don’t rise at the same pace as advertised stock levels.”
Nonetheless, whether Sydney and Melbourne will have a double-digit house property price increase, a lot of other areas are already showing growth recovery based on multiple factors, not the least of which is the rising asking price.
Normanhurst and Waitara in Sydney’s north are all in the recovery phase. Jeremy Sheppard, research director of Select House Property Group said, “A year ago, sellers in Normanhurst had to drop their asking price by 9 per cent on average just to get a deal done.”
“Now the average discount is about half that. In addition, auction clearance rates have jumped from about 60 per cent to around 90 per cent.”
Sunshine West and Hawthorn East in Melbourne are also showing signs of an upturn. Aspley and Zillmere in Brisbane’s north are also performing well and showing the same positive movement.
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