Property prices surge, but what could this mean for 2020?

Since the peak of 2017, Australia’s biggest cities of Melbourne and Sydney have seen property prices fall by 11.1 and 14.9 per cent. But after 19 months of declines, it looks like the Australian property market is finally bouncing back again – and at breakneck speed.

While figures released for November show average home prices in Australia grew by 1.7 per cent, the Sydney market increased by 2.7 per cent – the biggest monthly gain in 31 years. Meanwhile, property price growth in Melbourne wasn’t too far behind at 2.2 per cent. Average auction clearance rates of 79 per cent across Australia were also nearly double the 41 per cent recorded for the same time last year.

All signs seem to be pointing in the direction of a solid road to recovery, but the question remains, is the apparent boomtime trajectory of Australia’s property market as clear and predicable as it once was? With some experts predicting that Melbourne and Sydney will see price increases of 10 to 15 per cent over the next twelve months while others give a much more modest forecast of 2 to 4 per cent growth, it seems not.

The mixed bag of predictions for Australia’s property market in 2020 are hardly a surprise. After all, there are some unusual economic conditions at play with some factors driving the market forward while others are likely to stymie growth.

What’s caused the sudden U-turn?

There’s no doubt that it’s easier and cheaper to get a mortgage today than it’s ever been. While APRA recently allowed banks to relax lending standards again, consecutive interest rate cuts by the RBA have also piqued the curiosity of first home buyers who were pushed out in 2017 by high prices and tightening regulations. And it’s expected that further interest rate cuts are on the way next year.

According to expert commentators, the slump in property prices is also causing another real estate phenomenon known as Fear of Missing Out (FOMO). Now, with no further falls expected, it’s anticipated that first home buyers and investors will be rallying to seal a deal on property purchases for fear of losing out on capital gains or missing out entirely – again.

A rising market is not a foregone conclusion

Conditions are ripe for increasing market activity, but unlike the property price boom leading up to 2017, Australia’s wider economic picture isn’t looking so rosy this time around. Specifically, wage growth and household income in Australia has stagnated, economic growth is currently flatlining at 2.9%, employment growth is shrinking and retail spending is at an all time low. All these factors are likely to put up some fierce headwinds for Australia’s property market in 2020 – we just don’t know yet how strong they’ll be.

On top of these economic indicators, it’s important to remember that it wasn’t too long ago that some property experts were predicting a lengthy market crash while others more optimistically referred to the downturn as “the housing correction we needed to have”. But, as it turns out, neither of these eventualities went as far as expected. It’s for this reason that Alex Joiner, Chief Economist at IMF investors, told The Guardian that prices are currently rising again from an already elevated position, which doesn’t point to a lengthy period of sustainable growth.

The market has turned around quickly in time for a brand-new year which might see some new records set for Australia’s property market – especially in our biggest capital cities. But it’s fair to say that it doesn’t always have to be a tale of boom or bust. In the current environment, there’s every chance the property market might even stabilise throughout 2020, giving a degree of security and predictability that both buyers and sellers haven’t seen for some time.

In the short-term, as many sellers hang on to see how far prices will rise, there might be increasing demand for a limited supply of properties which will decrease the number of days on the market. In Sydney, the median number of days on the market has already shortened by 7 days between August and September. By using automated property search tools such as triSearch, conveyancers will be well placed to help their clients make offers and close sales in the fastest possible time through fast and low-cost due diligence checks.