As 2019 draws to a close, it’s time to take stock of the past 12 months and look ahead to 2020 and beyond. So, where are the Australian and New Zealand property markets headed? Here’s what experts are predicting.
New Zealand: Strong rebound or “rinse and repeat”?
According to property expert Ashley Church, in likely unchanged conditions, a lot of 2020 will be “rinse and repeat” for the New Zealand property market, including Auckland’s house prices remaining flat for another 12 to 18 months.
Church’s prediction, however, seems to contrast with what other commentators have said.
In May this year, Westpac chief economist Dominick Stephens said he expected the Auckland and Christchurch markets to rebound in 2020, along with the rest of the country. “We predicted that the housing market would gradually pick up, and that annual house price inflation would accelerate to 7 per cent over 2020. We predicted that the turnaround would be most noticeable in Christchurch and Auckland, which at the time were the weakest markets,” said Stephens.
ASB economists are also predicting strong growth, and expect nationwide house price inflation to pick up to 5-6 per cent year-on-year by around the middle of 2020: “Historically, New Zealand house price cycles have been relatively sensitive to interest rates, and we expect recent sharp falls in mortgage rates to deliver a mini up-cycle in prices over the next year or so,” ASB said in a recent update. “Still-strong population and labour income growth will add support.”
CoreLogic’s senior economist Kelvin Davidson agreed there is a “window of opportunity for at least the first half of the year,” thanks to favourable credit conditions and rising property market activity. But Davidson said a lot is still to be determined: “Next year, we’ve also got the general election to factor in – unfortunately, they tend to create uncertainty for property.”
Is the NZ property boom behind us?
There’s good news for first-home buyers, as according to ASB economists, the peak of the cycle may have officially passed.
“Even though mortgage rates are clearly the lowest they’ve ever been, there are good reasons not to expect a good old-fashioned housing boom of yore,” they explained. This could be due to subdued investor demand in parts of the market that previously featured a large investor component, like Queenstown and Auckland. Plus, housing supply seems to have picked up in some areas, possibly reducing the national housing shortage that has so far been a major driver of property prices.
Australia: Mortgage rates to underpin house price growth
On the opposite side of the Tasman, things are looking more promising than they were just a few months ago. As Michael Yardney from PropertyUpdate.com.au noted, “It wasn’t that long ago that the media was predicting housing market Armageddon, but the property pessimists have been proven wrong (once again) as our property markets bottomed out in June 2019 and are now slowly retracing their steps.”
A mix of lower interest rates, easier access to credit and increased certainty about property taxation have seen the housing market rebound in key areas like Melbourne and Sydney. As for the next few months, recent Metropole research suggests house prices may grow by 5 per cent in 2020 on average across all capital cities. “Not the double-digit growth some commentators are suggesting,” Yardney said, adding that the pace of property market recovery may be limited due to lenders’ more conservative approach towards assessing borrowers’ affordability.
“The availability of finance will be the biggest headwind,” Yardney said. “However, interest rates are falling, consumer confidence is rising and the banks are starting to loosen the screws and lend a bit more. This has meant more people are applying for home loans, more people are coming to open for inspections and vendors who have sat on the sideline waiting for the market to turn are gaining confidence as auction clearance rates are rising (although on low numbers).”
What other property analysts are saying
In November 2019, global information provider Reuters launched a poll of 13 property market analysts, asking about their predictions for the coming months. According to the respondents, average home prices would rise 5 per cent nationally in the new year and then slow to 4.5 per cent in 2021. Interestingly, all but one respondent said that the housing market activity is more likely to rebound in 2020 than decline again.
“We expect housing prices to continue to rise in 2020, underpinned by mortgage rates, which are likely to stay low for a considerable period of time,” said Paul Bloxham, chief economist at HSBC.
However, it’s not clear how long the revival will last, particularly with the “trade wars” between China and the US threatening global markets. “Low foreign demand for housing and a weaker economic environment should limit home price growth,” said AMP Capital’s senior economist, Diana Mousina. “Our view is of national home price growth of around 5 per cent after this initial bounce has run its course.”
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