Core Logic have reported that property values have increased for the month of June in Sydney and Melbourne.
As we predicted, the property rebound has begun!
This has been the first upswing in property values in Sydney since July 2017 and Melbourne since November 2017. According to CoreLogic, Sydney property values reduced over that period of time by 14.9% and Melbourne by 10.9%. This was one of the longer and sharper downturns in recorded history. So what has been the catalyst for the upswing?
As we noted when we made our prediction, the first major domino to fall was the Liberal & National Party winning the election, ending the uncertainty over looming changes to negative gearing and Capital Gains Tax legislation. Many would argue that the federal victory was won on the promise of less taxation rather than more.
APRA loosens up lending
Other fundamental and structural changes prior to, and since, the election have also had a positive impact on the property market. Prior to the election, APRA had started to wind back and remove the caps on investment lending and interest only loans.
Since the election, APRA has lowered the assessment rate from 7.25% for loans down to a minimum of 5.50% or 2.5% above the rate payable, which is set to be a game changer for borrowing capacity that is only now being implement by the banks. The increase in borrowing power and the impact on property values is yet to play out, but it will come!
RBA reduces rates twice
We have also seen back to back Reserve Bank of Australia (RBA) rate reductions – in a bid to increase consumer cash flow and spending. These rate reductions by the RBA are due to a concern over the economy – income growth is weak. They believe the new norm for unemployment levels to be at to drive economic growth is lower than historically, so we need to create more jobs. The productivity rate of the nation has reduced significantly. Productivity in 1976 reached an all-time high of 104.21 index points. In the last quarter it dropped from 101.2 to 99.9 so we all need to play our part.
Auction clearance rates are up!
Sydney and Melbourne auction clearance rates are on the way up. On the weekend Sydney’s clearance rate was 80%, its highest in almost two years. Albeit off a low level of stock that is set to rise and confidence is restored and the transition begins to move towards a seller’s market.
All of these factors combined have created the environment to set property prices on an upward trajectory. If you’re thinking of your next purchase, now might just prove to be the best time to get your Property Plan and Mortgage Strategy clear so that you are crystal clear on your Property Select strategy to take advantage of the increase in stock in the spring market!