This Housing Downturn is Over 2020

{Note from mods - this thread split from here: This Housing Downturn is Over}



Hi @Redom ,
I would be interested in hearing your thoughts on how you see the residential market play out for this year given the certainty around the rate cut in feb, the fires and its potential impact on immigration (if any) and a sharp drop in listings per below:

Why a sharp drop in home listings is good for recovery

Also keen to hear thoughts from @albanga as he was also on the mark with most of his predictions in the thick of doom early 2018 on the role of regulators and change in sentiment throughout 2019.

 

Hey Harris,
I am fairly confident we will see a continued recovery in 2020. I’m not expecting huge numbers but decent gains across the entire east side of Oz (5-6%).
I think the regulators are done. Maybe some small tweaks around the edges but the last big shots have been fired for now and are clearly working.

I’m basing this on the fact the latest changes have not yet fully filtered through along with the current low rates and potential for 1 or 2 more.
I’m not sure how big of an effect it will have but by all accounts the FHB government scheme has had a huge take up already.

I think the fires will have zero impact on immigration. I’m more thinking they may actually contribute to an increase in house prices just through a General increase in the economy. Their is A LOT of jobs that is going to come out of this mess.

 

I think it will be far more normal year this year than last - which we'll probably look back on as a bit of an anomaly in housing markets. No RC, no major state/federal elections, unlikely APRA interventions or much focus on regulatory change, no major rollercoaster riding price movements.

In general, the pro housing & pro economy moves made in 2019 will continue to have positive impact on the market. I still believe we're relatively early in this particular growth cycle and there's much more to play out over the next year or two.

Some general observations:

• Sydney & Melbournites will pay the highest ever prices for real estate again (they already are in premium pockets). In data terms, they'll both probably record double digit growth this calendar year (or thereabouts, particularly early). I assume there'll be a lot of talk of 'undersupply' again soon enough, as construction activity slowdown begins to show up in new dwelling figures & approval/build time-lags take hold again. More rate cuts may fuel rapid price rises again though.
• Growth cycles will spread around these two cities - i.e. western suburbs will look more attractive again, etc.
• Rental market should tighten from here now that previous supply cycle has peaked. Should help bring vacancy rates to more normal figures in Sydney over time.
• Investors will probably become a bit more active than the lulls of 2018, 2019. Won't be crazy, but access to funding & a lower hurdle rate will attract more investment credit demand than in the past.
• Construction activity will trough, and then rise again relatively quickly (this may be a bit rollercoastery on charts!).
• Economy will do better than people expect (assuming no shocks) - a bit of a u-turn following the moves made in 2019 now filtering through the economy. Unemployment/recession talk & rate cut expectations may flatten out. Lowe's previously been a cautious type operator, so if he doesn't cut again soon, expectations of another cut in this mini-cutting cycle may begin to go away as more positive economic data comes out.
• Credit growth will be at its highest rate in years.
• Non-major banks start getting more noticed towards the back end of the year - some of the players will post massive growth numbers this year (continuing on from previous years too).

 

Any crystal ball predictions for Brisbane?

 

No idea really @Sackie, a bit too far removed to have any reasonable insight - other than it should do better than 2019.

In general though, landed assets should do well, so long as economic fundamentals hold in the city where the assets are (rate cuts and more leverage don’t do much if the local economy has a lot of slack).

 

Thanks mate

 

https://www.smh.com.au/business/mar...-market-shifts-up-a-gear-20200110-p53qhv.html
ASX hits record high as bull market shifts up a gear
Recession?? Hmm.. where are all the doomsayers? 40% crash?

 

All ords at all time high, Dow Jones keeps hitting the roof.. interest rate at all time low..

 

Just started looking around again and it does seem that sentiments are high already. In feb, 2019 this particular property was about to be sold for 950k.
Later in Sept, 2019 sold for 1.1 million.

https://www.realestate.com.au/property/6-drayton-ave-castle-hill-nsw-2154

I had started to see houses in Baulkham Hills for under a mil but now all going well above.

 

this house was sold off market so the price should have been higher.

 

When rates keep going down, property and stocks can only go one way, up and up. Reckon Zero rates by end of 2020, housing markets will be booming! Low unemployment but lousy wage gains here to stay.

 

@Redom You mean, no rate cut?

 

Royal commission I believe.

 

I meant no royal commission that was in full swing early last year into banking.

It's difficult to accurately quantify the impact this had, but its clear that mortgage origination and credit flow slowed during the RC. This is largely associated with an over-cautious, poorly managed and fear based approach to lending from banks during a very public/turbulent year. The RC itself didn't have too much to say about credit decision making, but it certainly had an impact on it when it was in full swing.

In time, we may look back at the economic impacts & unintended consequences of having such an inquiry in this way. While there was clear merit in doing a review and major issues were identified across the whole financial system, the unintended consequence and sheer disruption to credit markets and credit flow is difficult to fully unpack (cant measure a counter-factual). IMO though, there was a very noticeable impact on confidence, credit flow, house prices, even macro figures like GDP %, overall jobs growth, etc from doing a review that led to credit flows coming to near standstill.

 

Home buying intentions hit record high

"The Commonwealth Bank's latest household spending index shows home buying intentions are running at a record rate indicating the rebound in house prices is likely to continue and help fire up consumption.

After property values surged by 4 per cent over the past three months – the fastest quarterly growth in a decade - there are also some tentative signs that a positive wealth effect could re-emerge..."

Very likely that we see growth rates in the first 2 quarters similar to the last 2 for Syd and Mel whilst Brisbane starts picking up..

 

There hasn't been much actual property activity over the past 30-42 days. No stock on market, few new listings, auction market closed, etc. All seasonal and standard for this time of the year.

Nonetheless, I'd be very surprised if the market doesn't start the year very hot.

Clearances, prices, median values, etc. At a credit level, which is usually a precursor to market activity, it's very hot, demand has spiked and there's a whole lot of urgency around. FOMO type behaviour is back. The media will all be talking about the mindset and fear of auction goers in Sydney/Melb within a month or two. I suspect we'll see a lot of results that just make us all think 'crazy!' over the next few months. When it's like this, supply simply can't respond in time (it will soon enough though).

IMO, come Feb 4, if the RBA move again, they'll send the property market into a complete frenzy. Not sure if this actually weighs that much in their decision making. The market reacting quickly makes a bit of sense when prices are down ~15% as it was in May (asset valuations were wrong given rate changes), but when the markets pared back the majority of those losses and incomes aren't really rising, rapid price rises from this base is the beginnings of where much of the 'danger' to financial stability begins being sown.

 

Hope so, planning to take advantage of this market behaviour and offload a beachside unit in the first half of the year. Two doors up recently sold for $1.44m which was a very strong result. About 12 months ago it was on the market and passed in at 1.2m.

I plan to wait for the hysteria and FOMO to take a stronger hold ( calculated guess) in a few months and then offload.

 

2/297 Bondi Road, Bondi, NSW 2026 https://www.realestate.com.au/sold/property-apartment-nsw-bondi-125526582

This was a good result 18 months ago.

I was at the original Auction when the couple bought is 670k a decade ago

 

Great result. Fingers crossed prices will get back to that status quo very soon.

 

@Redom Hey mate I'm trying to find your post of your theoretical/potential Sydney price increase of 20 or 30% or whatever it was based on previous performance changes i.e interest rate drops etc. I wanted to read it again and get your current version if interest rates drop 50 points if you don't mind. I recall you made some good observations and wanted to refresh my memory