2019 was a tale of two halves for Australia’s housing market.
When the year began, housing values were in a deep downturn and confidence was at rock bottom. The Hayne Banking Royal Commission was about to deliver its final report and Labor were odds on favourites to win the May Federal Election, which was to usher in negative gearing and capital gains tax (CGT) reforms that would further smash dwelling values.
The rest is history. The housing market was turned on its head when the Morrison Government unexpectedly won the unwinnable election on 18 May. Labor’s negative gearing and CGT reforms were jettisoned. First home buyer (FHB) deposit subsidies were announced. The Australian Prudential Regulatory Authority (APRA) announced cuts to both its interest-rate buffer and smaller bank mortgage capital requirements. And the Reserve Bank of Australia (RBA) began furiously slashing interest rates.
The impacts on the housing market were apparent almost immediately, as illustrated clearly in the next chart:
At the 5-City level, dwelling values bottomed in June 2019 after suffering a peak-to-trough decline of 10.7%, which included a 3.8% decline over the first half of 2019. However, in the final six months of 2019, dwelling values rebounded by 7.2%.
Sydney’s dwelling values bottomed in May 2019 after suffering a 14.9% peak-to-trough decline, which included a 4.3% decline in the first five months of 2019. However, over the final seven months of 2019, Sydney dwelling values rebounded by 10.0%.
Melbourne’s dwelling values also bottomed in May 2019 after suffering a 11.1% peak-to-trough decline, which included a 4.3% decline in the first five months of 2019. But in the final seven months of 2019, Melbourne dwelling values rebounded by 9.9%.
To describe the rebounds that have taken place across Sydney and Melbourne as extraordinary would be an understatement. Quarterly price growth was running at more than 6% across both markets at end-December, which matches or exceeds the growth rates experienced at the heights of the 2015 and 2017 boom periods:
The turn around in Australia’s housing market from mid-2019 was unprecedented, shifting from bust to boom in near record time.
It will be interesting to see where 2020 takes us.
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