The Fourth Quarter Comeback
Merry Christmas to all! We would like to take this opportunity to thank all our clients who sold or purchased through Dixon Estate Agents this year particularly for your continued support in referring new business as this is the greatest compliment we can receive.
Following is a quick recap of the year that was 2019, and as the decade comes to end so does a lengthy lull in the property market. This year saw slow going for the first three quarters in the top-end of the property market. Prestige Brisbane housing had been slower than average, with turnover similar to the 2008 Global Financial Crisis. Since September however, the market is regained momentum which we predict will continue into the new year. Sydney and Melbourne have already rebounded from the market fluctuations of 2019, Brisbane is only just starting to bounce back and will surely follow its southern neighbours. With interest rates at a record low, it will allow house prices to strengthen in the new year. We believe early 2020 will be the best time in the past decade for sellers to put their property on the market. Listing stock levels are low and buyer enthusiasm is increasing. You don’t need an economics degree to work out what this does for values. Early 2020 will deliver strong results for sellers.
Looking back at the year in a chronological order, from January 2019 there has been several history making events, several left field issues plus many changing trends which contributed to the fall and rise of the BRISBANE property market.
Credit squeeze
Australian Prudential Regulation Authority’s (APRA) in February upgraded its APG223 guidelines, intending to establish sound lending practices by increasing the number of hoops required to be jumped by mortgage applicants.
The tough stance adopted by APRA and ASIC in the wake of the Hayne Royal Commission has resulted in zealous adherence to these guidelines by all mortgage lenders resulting in a sharp fall of residential loan approvals of more than 20% between March 2018 and March 2019, the largest decline since 2008.
Drought and flood
In February Northern Queensland became an inland sea with floodwaters ranging South from Bowen, North to Ingham and West to Cloncurry. The Insurance Council of Australia estimating a damage bill of $1b plus.
A severe drought was converted into a significant flood and these weather events have resulted in the highest drop in national herd for decades. With beef cattle being one of Queensland’s major exports, this undeniably took a major hit on the state’s economy.
Negative real estate publicity
Although Australia composes hundreds of micro real estate markets, our national media only report on Sydney and Melbourne. With Sydney prices shrinking 11% and Melbourne prices 10% from their peak values in 2016, widespread ‘doom and gloom’ was reported insinuating the same fate Australia wide. This media narrative has undeniably had a significant impact on buyer confidence.
Leadership tensions
Ongoing instability in the coalition’s leadership during late 2018 was also impacting consumer confidence. When the eventual outcome of Scott Morrison as the new Prime Minister concluded, everybody knew this meant an election in the first half of 2019. For reasons unknown to economists, buyers and sellers are reluctant to engage in real estate transactions in the lead up to an election.
Labor ahead in polls
Regardless of who you vote for, the top end of the housing market is all about business confidence, which is generally higher under the Coalition Government. Labors proposed changes to negative gearing and dividend imputation was leaving a large section of the investment community disillusioned.
The good news
With much of the above now behind us, these positive counter-factors are set to turbo charge the market for the balance of 2019 and into 2020:
Credit Flowing
APRA’s early June announcement to scrap the serviceability buffer immediately, started a loosening of the credit squeeze, once again allowing bank money to flow. This was just reaffirmed when ASIC lost a landmark court case against Westpac. When the federal judge Nye Perram correctly confirmed that buyers would be happy to reduce their living expenses in order to meet repayments.
Winning the Unwinnable
The Coalition in a surprise result was returned to Government. A more pliable senate and a strong leader unlikely to be challenged will, political analysts predict, produce a far more stable government than what previous leaders did. Business thrives on stability and looks forward to a more certain three-year business cycle.
Southern Capital City Markets Bottom
Multiple market reports, including Herron Todd & White’s August Month in Review, speculate that Sydney’s and Melbourne’s property markets appear to have finally bottomed out. Sydney prices dropped 15% off their 2017 peak but the coalition’s surprise victory and the record low interest rates together with improved sentiment have halted the decline. Indeed, clearance rates at the time of writing had surged to a two year high of 76%.
$1.00 US Now Buying $1.47 AUD
The Australian Dollar has been steadily falling, dropping from US$0.80 18 months ago down to US$0.67 as at August 2019. This is a compelling reason for Expatriates to enter the Australian residential market. Most Australians working overseas whether it’s in Asia or elsewhere are paid in USD. This exchange range will bring forward Expatriate purchasing.
Property Gap Too Wide
No one is arguing that Brisbane’s medium price should be equal to Sydney or Melbourne. However, history has shown that once the differential gets out of hilt buyers quickly head North. This value proposition in Brisbane properties will see a boost in its market from interstate migration, its attractiveness to Expats and investors.
Queensland’s Major Industries
Coal, tourism, education and cattle are Queensland’s top four exports and greatly boosted by the low dollar. Coking coal prices are at a high, with the Hard-Coking Coal spot price currently just below $250/tonne and annual exports forecast to reach 203 million tonnes by 2023. Tourists are arriving at our doorstep in droves. Brisbane’s new casino is under construction and due for completion in 2022 and includes three new hotels and fifty bars and cafes. The cost of Asian families to educate their children also dropped dramatically with the dollar and this rapidly expanding industry will continue to prosper. The buying power of the wealthy foreign students makes a rapid and significant impact on the Brisbane economy. Our resilient farmers will, as always, put their heads down and have been successfully rebuilding their cattle stocks.
The past is always a good predictor for the future, we at Dixon Family are confident that the start of 2020 will be kicking off strongly. We look forward to assisting you in any of your property needs and wish you a merry Christmas and a prosperous new decade.
