Following the recent downturn, we’ve all been closely monitoring the property market for signs of recovery. While the end of 2019 delivered better than expected metrics, it’s been difficult to predict how long it might take for the housing market to start bouncing back.
Newly released research from QBE seems to indicate that might happen faster than anyone expected.
According to the latest QBE Housing Outlook Report for 2019-2022, property prices across all capital cities are expected to stabilise over the coming year, with population growth and a downturn in new dwelling completions expected to drive up prices by 2022.
Together with easing lending conditions, tax certainty and lower interest rates enticing borrowers back into the market, it’s expected that the resulting imbalance between supply and demand will see a steep rise in prices during the next two years.
Could this expected growth in property prices fuel a v-shaped recovery? Let’s crunch QBE’s numbers to see what the next few years could look like and what it means for you as a property investor.
Supply v Demand
QBE forecasts a growing supply and demand imbalance that will be a powerful factor in the property sector over the coming years. This imbalance will be fuelled by a number of influences, simultaneously driving up demand and impacting the availability of housing supply.
Demand is expected to grow due to the following factors:
- Low interest rates (with no signs of this changing anytime soon)
- Tax concessions and Government incentives for property owners
- Easing lending conditions
- Increasing population
Demand for property is set to grow over the next few years with favourable lending conditions, more buyers in the market and a growing population inflating demand across every market. If this demand can’t be met, prices will inevitably rise as competition increases amongst prospective buyers.
- Units take almost three times longer than houses to reach the market
- There was a 10% fall in building approvals in 2018/19
- Construction completions are forecast to be 22% lower in 2020/21
While demand is set to increase, issues with the timing of future supply will have a significant impact on the availability of property. A fall in building approvals in 2018/19 and a forecast reduction in construction completions through to 2021 is set to reduce the number of properties available by 2022.
QBE expects these forces could tip previously oversupplied markets into undersupply, leading to sharp recovery across most markets. This is set to fuel growth in property prices for both houses and units.
Predicted Growth in House Prices
Buying a home is still a dream for most Australians and this ongoing desire for home ownership will help drive the predicted growth in house prices through to 2022. Houses are set to experience the greatest growth over the next two years, with first homeowners trying to get a foot in the market and investors ready to make a return.
Forecast Median House Price Growth 2019 – 2022
With strong growth expected in each capital city, regional markets should follow suit, with prices set to rise in Newcastle in line with Sydney. For investors, this means that 2020 could be your best chance yet to add to your portfolio, giving you the opportunity to make the most of the growth to come by 2022.
Unit Prices Set to Rise
Median unit prices are also expected to increase across Australia in all capital cities except for Sydney, (which is looking at median unit prices reducing by 0.3% in 2022). The current oversupply of units will be resolved due to a reduction in construction completions, leading to modest price gains across most markets.
Forecast Median Unit Price Growth 2019 – 2022
While units are not expected to experience the same price growth as houses over the coming years, they still represent a solid investment and promise a real return. Property investors should take the opportunity to review their position to see whether adding to their portfolio is feasible during 2020.
Is a v-shaped recovery on the horizon for the property market? These forecasts from QBE paint a rosy picture for investors and indicate that growth in property prices is just around the corner, an expectation beginning to be shared by others. If this is the case, we’re looking at one of the quickest recoveries in recent memory which could look rather v-shaped.
To make the most of this dynamic environment, it’s recommended that you speak to a finance and property expert, like our team at Vision Property & Finance. We’ll work with you to take advantage of every opportunity over the coming years to maximise your return on investment.
Get ready to take advantage of the expected growth in property prices by contacting our Sydney office on 02 8354 3000 or talking to our Newcastle office on 02 4014 1999 to find out more. You can also contact us here.