Since the record market slump that ran deeper and deeper until May 2019, Sydney has led the country’s rebound to market health, with house prices recovering almost $50,000 in the first quarter since the turn-around, according to Domain’s House Price Report. Houses prices regained almost one-third of the value lost during the two-year downturn, with the city’s median up 4.8 percent to $1,079,491 according to Domain. Avnu has sold several properties above reserve, as well as set some records, including Team Michael Coombs’ sale of 2 Shellbank Parade, Cremorne for a suburb record in December.
So with that being said, will the confidence that has returned stick around to see 2020?
In the Pro’s column, auction clearance rates are high, with Mosman sitting at 86 percent for a three bedroom house. Stock levels are increasing after being relatively restricted throughout the second half of 2019. Although the low stock levels were raising sales prices due to competition, more stock will draw buyers up from lower buyer brackets – who are being pushed up by moves to mobilise the entry level of the property market.
This will be achieved through the lower interest rates, which have spurred consumers to abandon the Big Four banks en masse and seek more favourable conditions – including the full rate cut – with smaller lenders. This had the effect of forcing the big banks to also adopt the lower rate. 2020 may see consumers realising that they have more power than they thought.
Another method of achieving a trickle-up housing market is the introduction of the First Home Loan Deposit Scheme. The new Scheme allows first home buyers to secure a loan with a deposit as low as 5 percent and buy property sooner without the extra costs. The Government acts as the guarantor for up to three-quarters (15 percent) of the typical deposit most first home buyers save for.
Essentially, buyers will have the opportunity to get a mortgage faster, and save in insurance premiums that are normally paid with a deposit under 20 percent. Although not intended for your standard lower north shore or Killara buyer (the Sydney cap is set at $700,000), it will create entry points for people in the mid-to-lower ends of the market. The people who sell these properties will be forced onwards-and-upwards, and the cycle will continue, generating a new generation of home-buyers reaching all the way to premium markets.
But there is also the potential for hardship.
One problem, despite financial aid schemes from the Government, is affordability – people have too much debt so serviceability is difficult. An ABC article from October 2019 reports that Australia’s national household debt is at,
“120 percent of GDP — that is everything the nation produces in a year — Australia’s household debt is second only to Switzerland.”
The effect of this will have made itself known and we will know the success of these schemes by the middle of the year.
It is for this reason that people should be looking at improving their financial surety – visiting financial advisors early and preparing for potential investment. They should be investigating whether they are eligible for the kinds of schemes like the FHLDS that could help them to afford homes. With the increasing house value, the first half of 2020 presents the most optimal opportunity people will have in, perhaps, the next two years to afford a home.