At the dawn of the last quarter of 2019, forecasts for the real estate market in 2020 are pouring in. Some of them give a rather promising prospect for the next 12 months – so rosy that it may be too good to be true.
This week, a number of newspaper headlines report "a return of the real estate boom," citing high bid-raising rates of more than 70 percent in capital cities such as Sydney, Melbourne, and Adelaide. However, a closer look could tell a different story.
"On September 7, in Sydney, Melbourne, Brisbane, Canberra, and Adelaide, the difference between clearance rates published by industry and the truth averaged 47 percent," Jenman's Neil Jenman said. Support.
"In Melbourne, there were 704 auctions including 411 auctioned. This is a true verification rate of 58%. The industry claimed a compensation rate of 74%. In Sydney, there were 444 auctions, of which 281 were sold. This is a true verification rate of 63%. The industry claimed a compensation rate of 82%. "
According to Jenman, the danger of these claims lies in the fact that traditional publications carry these predictions and give them legitimacy.
"The Australian Financial Review has published on the front page an article on how" the RBA's cheap money triggers real estate auctions. "The newspaper regurgitated the real estate industry's false figures."
Stagnant unemployment rates in the country, low wage growth, and the lowest GDP growth rate over the past decade are also factors that suggest that things are not as optimistic as they are. may appear on the real estate market. In fact, per capita GDP growth has turned red – one more reason for potential investors to be cautious in the market because of the weak economy.
Some may argue that low interest rates are positive, but Metropole Property Strategists CEO Michael Yardney notes that this does not indicate strong performance, as credit restrictions limit the market.
"I would expect our capital markets to post capital growth of about 4% to 5% in 2020, despite the two expected new interest rate cuts. . There are too many headwinds – particularly strict credit criteria despite lower interest rates, "he says.
"Of course, the reduction in interest rates by the APRA has slightly eased credit constraints, but the more restrictive treatment of spending by banks and the establishment of a "Full credit report" from September this year should probably offset this easing. "
Yardney notes that if the RBA lowers interest rates to improve unemployment and spur inflation, "the last thing they want, it's a new real estate boom" .
Credit availability is expected to tighten again as housing prices rise and market trends in the spring will tell the story of the real estate market in 2020 – but there may be a lot Too soon we return to a period of prosperity.
Therefore, investors should keep their expectations temperate even when the reported numbers look promising.
"Historically, auction liquidation levels in Melbourne and Sydney corresponded to an annualized growth in real estate prices of the order of 15% to 20%. However, I do not think this level of price growth will happen this time around, "Yardney concludes.
St Kilda West
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