How’s the Market?
The housing market has enjoyed its best few months since the middle of 2017. The sharp reversal in the market started in June, shortly after the Federal election, reversing an almost two-year decline in housing prices.
There are several factors that led to the change in consumer confidence, most of which should continue to boost growth in the housing market:
- Increased consumer confidence after the Federal Election win by the Coalition which provided a stable government, ending any uncertainty associated with the changes being proposed by the Labour Party, to Capital Gains Tax and negative gearing
- Several interest rate cuts
- APRA’s easing of the bank’s assessment criteria for new loans has led to more loan approvals
- Tax cuts
- First home buyers, encouraged by Government incentives, have returned to the market
- The positive commentary in the media in general
The drivers that have the biggest effect on the property market, provided people can borrow are
- interest rates, employment and population growth.
A collapse in housing prices can arise when multitudes of people are forced to sell because they either lose their job and/or interest rates rise too high and they can no longer afford to pay their mortgage. This causes a flood of properties coming on the market which then drives prices down as supply exceeds demand. This looks like an unlikely scenario in the current market.
Instead, it would appear the growth trend in the housing market is gathering momentum and looks set to continue. There are however two possible scenarios that could slow down the market. There is talk of an impending global recession. The impact of a recession on our housing market is uncertain but may not be severe considering Australia already had a housing market correction. The other unknown is a major international incident or disaster, the type that could have a catastrophic effect on global economies and the world markets in general. But the risk of such a global incident occurring is always present.
