2019 has been a rollercoaster ride for property investors. Starting low and slow in the shadow of ongoing downturn and uncertainty, the picture is very different 12 months on, with growing signs of recovery in the market.
With positive growth recorded over the last four months, prices are beginning to rise in Sydney and Melbourne, representing the fastest market turnaround in decades. Considering there was no prospect of recovery at the beginning of the year, this is a remarkable change from the uncertainty of January.
From the Hayne Royal Commission through to the surprise federal election result and successive interest rate cuts in the last half of the year, it’s been a year of ups and downs for property investors.
To make sense of the year that was and what that means for the year ahead, we’ve put together a summary of the highlights (and lowlights) of 2019 for property investors.
2019 for Property Investors
The first half of 2019 was characterised by a lacklustre market, influenced by the ongoing property downturn. With property prices still low, the uncertainty surrounding the royal commission and the May federal election further stagnated the market. This resulted in most investors deciding to stay put during 2019, holding their position while closely monitoring signs of recovery in the market.
Banking Royal Commission
The highly anticipated findings of the Hayne Royal Commission were handed down in February, containing 76 recommendations relating to mortgage brokers, insurance, superannuation and financial advice. While serious misconduct was identified in several organisations, the recommendations were less savage than predicted, restoring some certainty to the struggling property market.
Negative gearing and capital gains tax were big issues in the May federal election. The Labor opposition promised to reduce access to negative gearing if they won government as well as wind back capital gains tax relief. The looming impact of these changes increased uncertainty in the market in the first few months of the year until the return of the government eventually assuaged investor fears.
In a bid to stimulate the economy, the Reserve Bank of Australia (RBA) cut rates in July by 0.25%, the first change in the cash rate for almost three years. With two more rate cuts made since then, the cash rate is now at a historic low of 0.75%, with the prospect of more cuts to come in 2020. These cuts have (in most part) been passed on by lenders, giving property owners some welcome relief.
Despite falling interest rates, it’s been tough to secure credit for investment loans, stemming from restrictions put in place by the Australian Prudential Regulation Authority (APRA). While APRA loosened the reins on loan serviceability in July, the continuing difficulty in securing credit in a slow market is reflected in the lower than usual number of investors represented in lending figures over the year.
Fuelled by the return of first home buyers and activity in the premium end of the market, Sydney has experienced remarkable growth in prices in 2019. Beginning the year with declining values, the Sydney market recorded a 5% growth in the last quarter. In fact, SQM has recently released research suggesting that prices could jump by as much as 15% in Sydney as recovery takes hold in 2020.
The second half of 2019 has been characterised by improving property metrics. Over the last few months, the number of days for a property to sell has decreased, indicating a tightening in supply in the market. There has also been a decrease in vendor discounting, illustrating growing buyer demand. With auction clearance rates remaining firm, these signs point to sustained recovery moving into 2020.
How was your year as a property investor? Are you looking to increase your return on investment in 2020? Vision Property & Finance can help you make the most of your investment and maximise your return. For more information, call 02 8354 3000 to contact our Sydney office or 02 4014 1999 to talk to someone in our Newcastle office. You can also contact us here.