2019 has started with a Bang.
Waking up, January the first, and it seemed like the whole week of the first week of January, all we got was negative news from the media.
Which is probably called for, and fair enough. So what I’ve done is, compiled a few of the news reports, that have come in, and we’re just going to study a few things that they say. Then I will take a look at some of our articles and see how they line up.
The Financial Review, it talks about Sydney property values are now at the same level as they were in June ’16, while in Melbourne prices are back to where they were at the beginning of ’17. This is stemming from restricted lending practices by banks to borrowers and is expected to continue well into 2019. Interesting dates.
ABC Australia says, will see the biggest house price declines this year, according to one of the world’s major credit rating agencies, which declared homeowners would have to wait until 2020 to see any recovery. Fitch credit rating agency said the national decline was driven by lower investor demand as regulators impose restrictions.
News.com.au has an article on Meriton constructions. Meriton founder Harry Triguboff called for an easing of taxes to coax foreign buyers back into the market, and for young people to be able to access their superannuation to buy a home.
Why save for the future? Just buy a home now….
It goes on to say that Sydney and Melbourne house prices have fallen about 10% from their 2017 highs. And I found something here from Smart Property Investment magazine about housing affordability. It outlines the Sydney and Melbourne housing market update by KPMG and says;
‘housing prices won’t go into freefall, but the two major capital city markets of Sydney and Melbourne expected to reach their lowest point this calendar year, so that’s 2019. However, Melbourne is expected to recover during 2020, and Sydney perhaps a little bit behind in 2021.’
Another article from the Australian Financial Review refers to apartment builder Mirvac. Early 2018, Mirvac pulled out of the apartment development scene. Based on population projections, Sydney needs 36,000 new dwellings, including 27,000 new units, every year until 2036, but this number won’t be met due to funding constraints. Interesting.
All the other articles are talking about lending being tightened for developers and investors and yet there’s this demand that’s needed. The current forecast to 2021 indicates further reduction in completed projects, and looking ahead, should completions of projects consistently fall short of the dwelling demand, then supply shortages will take effect. From 2021, they’re saying there’s supply shortages in the property market.
We’re going to revisit an article that I had written on the 19th of May 2016, and you can go and see it on our website. Here propertyadvice.com.au/property-cycle.
In that article I talk about the property cycle and the way that it works with the seven years, and the one year, and the three-and-a-half years, and the seven years, and all that sort of stuff. Anyway. You can read that article there. It’s all based on Phil Anderson’s work, an Australian economist.
In that 3-year-old article there is a chart that outlines the dates of market movements. Starting at the end of 2008 when GFC happened, we got three-and-a-half years down, so that, leaves us to late 2011, and that was the stabilization of market coming into 2012. From then, there were seven years up or sideways, which takes us into late 2018.
Now we’ve got 2018 plus one year, so the property cycle goes sideways for 12-18 months in what they call a mid-cycle slowdown. We’re looking at late 2018 all the way through to 2019, possibly early 2020. And then from late 2019 all the way through to 2026 is the next cycle in the market, which is an up or sideways movement. So that’s the next buoyant part of the property cycle, 2021 – 2026.
My point is, that looking forward from say middle of 2020, definitely from 2021 onwards, which we’ve already identified, in 2016, it’s the point when the market’s going to take another nice run upward. That’s all good. The fact is that we told you three years ago, that from the end of ’18 all the way through ’19 is going to be a really bad year in property, and we have to wait three years to be proven right, but here we go.
If you want to know things three, four, five, six, seven years in advance, you need to be part of our program, Xenium. And for more information on that, click here.
That’s it for now. Quick update for the year, give you a forecast of what is going to happen. Yes, this year’s going to be a bit of a ho-hum year in property. There will be drops. There will be good buys for those looking to buy. Don’t look to sell unless you absolutely must sell. It’s not a good time to sell, so don’t sell.
That’s it from me, till next time…
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Since 2004 Scott Northcott has been helping people buy the best properties for their needs at prices that simply speak for themselves.
Scott has been instrumental in bridging the gap between financial planning and traditional real estate transactions through his property advice model. By carefully considering his clients’ goals and planning for market changes via demographics and trends, Scott designs a future proof outcome not only specific to the client’s needs but dynamic in its execution with performance indicators and exit strategies built in.