Finally we can get on with it!
After the weekend we’ve just had, normal transmission can resume in Australia’s property markets. Well, almost.
At the start of this month, four factors were creating a perfect storm that impacted negatively on housing markets.
Thanks to the unexpected events at the weekend, two of those are done and dusted.
A Federal Election is always a brake on activity in real estate and elsewhere. It creates uncertainty in the minds of consumers who want to see what happens before deciding on big spending commitments.
Mercifully, that’s all over and we can get on with life in an atmosphere of political certainty.
The second element of the perfect storm was the prospect of a Labor Government causing major problems in real estate with its ill-advised changes to negative gearing.
Now the housing industry can get on with business without that negative-gearing negative lurking in the background.
If the Labor Party learns anything from losing the un-loseable election, it will consign the negative-gearing policy to history and never speak of it again.
The increased difficulty in getting finance, thanks to APRA’s over-eager bureaucrats and the banks’ over-reaction to the Royal Commission, is the third element of the perfect storm. That’s the next one to get sorted.
There are growing signs that major lenders are loosening the shackles and competing for new business from investors. The ANZ Bank recently admitted it had gone too far in tightening up its criteria in assessing borrowers.
If banks fail to lighten up and make it easier to get loans at competitive interest rates, they’ll be shooting themselves in the foot along with everyone else in the housing industry.
Banking boffins aren’t the sharpest tools in the corporate shed, but there’s evidence they know they have to make it faster and easier for consumers to get the loans they need on attractive terms.
The process would be aided by a reduction in the official interest rate which, according to most analysts, is likely to happen sooner rather than later – especially given the evidence that the economy is coughing and spluttering a little. Rapid and decisive action from the newly-endorsed Federal Government, as well as the Reserve Bank, is needed.
The fourth factor, and it’s been a big one, has been the attitude of mainstream media. The big newspapers have been indulging a feeding frenzy of negative sensation, taking the downturn in the two biggest cities and turning it into a national crisis.
There have been repeated claims that prices are falling everywhere. They’re not, not even in Sydney, where there are 95 suburbs with median prices higher than a year ago and particularly strong price performance by some of the apartment markets.
In Melbourne, 57% of suburbs with unit markets have median prices higher than a year ago, as well 36% of suburbs with house markets. That’s what our suburb-by-suburb analysis shows.
The message is even more positive in cities like Adelaide and Brisbane, and in many of our regional markets, notably Victoria and
New South Wales.
Notwithstanding those facts, the big city newspapers keep telling us that prices are falling across the nation and there are regular predictions of a nation-wide collapse in prices. That needs to change because, frankly, it’s becoming boring.
More recently, the tone of the headlines has started to lighten. Writers have begun to acknowledge the gathering evidence of a bottoming of the Sydney and Melbourne downturns, with the prospect of impending recovery - while also noting that there are markets elsewhere in the country that are strong and rising.
It’s amazing how fast things can turn around. A few months from now, I expect we will be able to look back to early May and marvel at the difference in conditions and atmosphere as, one by one, those four elements of the perfect storm have been struck down.
One weekend has changed the whole atmosphere surrounding residential real estate.
Article courtesy Terry Ryder from Property Observer 20 May 2019
