Why has the property market rebounded?

Market Insights
4 years ago
2 minutes

After a near two year decline, Australian property prices are well and truly back on the up.

SQM Research 's managing director Louis Christopher has even predicted a 15 per cent increase for Melbourne’s housing values for next year in his ‘Housing Boom and Bust Report for 2020’.

It’s not just the Victorian capital that is expected to see rising house prices, with Sydney dwellings expected to jump up 10 to 14 per cent.

It’s a remarkable turnaround. Just earlier this year, Australia’s notoriously expensive housing market was in freefall. Prices in Sydney and Melbourne had fallen by double digits from their 2017 peak and credit was being withheld by nervous banks. 

Now, Melbourne prices are close to showing positive growth for the past 12 months — not bad considering they were down by 6.2 per cent on the year in September. Sydney is following suit, with an 80.5 per cent clearance rate last weekend.

So what has caused this sudden and largely unexpected upturn? The answer appears to be two-fold. 

First of all, Scott Morrison’s surprise election back in May signalled the Australian Prudential Regulatory Authority (APRA) to urge banks to loosen credit restrictions that had largely caused the downturn in the first place back in 2017. 

Second, two successive interest rate cuts by the Reserve Bank have transformed the housing market and buyers once again could back themselves to purchase property once again.


Mr Christopher though, says APRA’s post-election U-turn was crucial.

“With APRA, what they really did was, someone knocked on their door and said, ‘Look, you’ve gone too far, we’ve got a downturn in the economy, you’ve got to loosen the lending restrictions.’ And they did.”

Another key aspect to the upturn, especially in Melbourne, is population growth. The Victorian capital has expanded from 4 million people in 2011 to 5 million in 2019.

“The city has expanded by one million, which creates a large underlying accommodation requirement for that many people,” Mr Christopher added.

This has been backed up by figures from CoreLogic this week showing strongest demand from owner-occupiers — up 17.3 per cent from May to September — rather than investors, up just 8.4 per cent.

The recent rise in house prices is set to encourage more sellers to put their properties up for sale in the coming months, meaning this property growth intends to stay.

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