What The 2020 Property Market Could Bring?
So far, we have had a boom, then a correction. Are we now headed for a comeback? According to the Quarterly Survey by Nab , in which 300 property professionals were surveyed, it would appear that property prices are on the upswing.
The overall sentiment between property professionals and Nab is that property prices should strengthen overall well into 2021. The only state that those surveyed were not confident of an increase was WA. Nab tips property growth over the Capital cities to be a moderate 4.5% over 2020. But it is still an increase.
What also may fuel the demand in housing is that further interest rate cuts may be on the cards. So far the interest rates being dropped by the RBA to record-breaking lows may be part of what has fuelled an increase in demand for housing. In September of last year, the AFR’s economist review survey, correctly predicted the October Rate cut to 0.75%. The same group is predicting that rates will drop to 0.5% by the middle of this year. If this does eventuate, it will be good news for borrowers. However, it may fuel housing price increases that may put homes further out of reach for First Home Buyers.
Property developers may be set for a rough year with the RBA Deputy Governor Guy Debelle saying that”we had expected construction activity to remain at a pretty high level for most of this year, but it turned down sooner and by more than we had expected.”The RBA are forecasting a further 7% reduction in investment for the year of 2020. This could have flow-on effects to the economy as well as the related business services, engineering, and manufacturing services.
Another thing that may further stimulate the property market may be a resurgence of overseas investors. A recent Survey by Juwai . The largest website for Chinese investors looking to purchase, outside the mainland -suggests that buyers could be coming back. of the Chinese tourists questioned 27% of them reported they would consider buying a property on their next overseas trip. With well over a million Chinese tourists visiting Australia a year, that would possibly increase demand dramatically. There are talks of Bejings Capital control regulations also being relaxed soon. These regulations restrict Chinese money from being spent in overseas markets. Couple this with an Australian property market that is recovering, and we could be in for a strong resurgence of foreign investment while this would be good for the economy and current homeowners. Again this could push property prices well out of the reach of first home buyers.
One of the good news bits for 2020 id that the government has launched the First Home Deposit Scheme. The First Home Deposit Scheme is a scheme that will see the government guaranteeing 15% of the deposit required to buy a property to ow and middle-income earners. Beneficiaries of this scheme will still need to save a 5% deposit, but will now be able to avoid the dreaded Lenders Mortgage Insurance. This will also put eligible lenders in the competitive interest rate band of lenders for people that have a 20% deposit, allowing First Home Buyers to have more competitively priced home loans from the start. Another great outcome from this scheme is that the government gave 50% of the allotted 10000 spaces to non-major banks, allowing competitiveness across the market. The only downside that I see here is that spaces for this are likely to fill up quickly. There are roughly 110000 new homebuyers a year, so 10000 spaces are likely to be taken up very quickly.
If you are looking at getting into the property market, 2020 may be a good year to consider this. It pays to have a good mortgage broker on your side. We can guide you through the finance process and play devils advocate to all the options out there as we are not employed by lenders, but work for you, and have a “best interest” obligation to you. Castle Mortgages is a company of Mortgage Brokers based in Adelaide that are great at what they do. We would love to have a chat with you about your future plans and help you to set up your finance. Get in touch with us today.
Please note that this article does not constitute advice and is general in nature. Everyone’s circumstances are different, and you should seek professional advice from a mortgage broker, financial planner or accountant before weighing up your options.