In January I spent 3 weeks in the united states visiting southern Arizona, Santa Fe , New Mexico and California. I can report that our markets are very different and therefore so difficult to compare due to different tax regimes, market size and supply. Overall, the Australian market has rebounded very strongly, surprising most commentators including me
If we look back at 2019 it was a year of two halves. The first 6 months our markets were retreating, property values experienced their greatest falls in 30 years. There was a royal commission into banking. A credit squeeze and elections in NSW, Victoria and federal election.
All contributed greatly to putting a handbrake on our economy and property market. From peak to trough in Melbourne property prices had fallen 15% and we were all bracing ourselves for a change in Government at federal level which would have meant the removal of negative gearing on investment property and changes to capital gains tax legislation
I have no doubt that should these changes were introduced property prices would have retreated a further 10%. Fortunately, this did not happen
Following the election result, almost immediately, we saw confidence return. Clearance rates moved upward from a low of 50% to 75% today. Head count at open for inspections rose and demand for property outweighed the supply and before we knew it we had stock shortages with transactions volumes plummeting 25% lower than at the same time the year before..
Consequently we experienced the largest “V” shaped recovery in 30 years.
Prices in many suburbs in Melbourne have already recaptured their falls of the first half and many suburbs have rebounded 15% to 20% between July 2019 and December 2019. This is particularly the case for Melbourne’s inner south and eastern suburbs
The outlook for 2020 looks as positive that I can remember for some time.. The moons have aligned with lower interest rates, an easing of lending requirements, an acute shortage of affordable family friendly homes and government incentives to some sections of the market in the form of 5% deposit, stamp duty concessions up to $600k and grants to first home buyers.
Watching the movement of stock during the holiday period is always a good indicator as too how the regular property market is going to open in 2020. Already November and December stock has been totally absorbed. This level of demand and continuing stock shortages lead me to the view that the late summer and autumn opens to our market is going to be very strong. I am confident clearance rates will remain above 70% and if this holds true we can expect Melbourne’s median house price to grow a further 8-10% in 2020