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What Will Happen To The Melbourne Real Estate Market in 2020?

What Will Happen To The Melbourne Real Estate Market in 2020?

If you have been living in Melbourne, then you should know how Melbourne is often referred with the common phrase “four seasons in one day”, where you can start off the morning with chilly winds while blazing heat strikes in midday. 

The significant changes in the real estate industry throughout 2019 have been controversial to most predictions made at the end of 2018. Similar to Melbourne’s weather conditions, there could be some changes in the real estate market that will be hard to forecast. 

From cash rate reaching a record low, property prices began to spark higher, to incredibly high auction clearance rates, all of which were not part of the predictions at the start of 2019. 

Most predictions during that time did not show a positive outcome but in reality, buyer activity has seen major growth towards the end of 2019 that caused property prices to increase approximately $3,000 per week in Melbourne and Sydney.

As we enter the early stages in 2020, you must be wondering:

“Is 2020 The Right Time to Engage With 

The Melbourne Real Estate Market?”

You’ve heard us preach how predictions may be inaccurate, so you might be wondering why you should listen to us making a prediction about what will happen in 2020. 

Even when it has the potential to be inaccurate, Xynergy Realty incorporates current facts and statistics as well as analysing trends to provide recommendations to our clients. As we consistently keep track of the changes, make sure to subscribe to our newsletter and check our website to never miss important updates!

In May 2019, ANZ had released a report that predicted how property prices in Australia were going to keep declining by 6.60% in 2019 and a further 0.9% in 2020. However, another report made in June 2019 by ANZ showed a revision of those figures. ANZ stated how prices will decline by 2.10% in 2019 and will actually increase as much as 4.30% in 2020. 

Furthermore, ANZ also added how Melbourne will experience a significant price increase compared to other cities of Australia, followed by Sydney and Brisbane. Reasons as to why ANZ had revised their predictions may be related to the softening of lending regulations from the Australian Prudential Regulation Authority (APRA); strong population growth as well as the cash rate reduction.

Besides ANZ, a report made in October 2019 by The Urban Developer also mentioned how 2020 will be the year when Melbourne’s property prices will reach new heights for both houses and units. The report emphasized how Australian property prices are currently readjusting to where it originally stands after heavy reductions up to mid-2019. As seen on the table below, property prices are forecasted to increase mainly in Inner East Melbourne.

Source: The Urban Developer, 2019

Given all the factors that contribute to the huge spark in Melbourne property prices, Louis Christopher, director of SQM Research had mentioned that this will only be beneficial in the long term only if it’s backed by strong credit growth. According to Louis’ estimation, property prices in Melbourne are 27% higher than it should be, making it very sensitive to changes towards interest rates and APRA regulations.

According to Shane Oliver from AMP Capital, the main reason why the housing boom in 2012 lasted very long was due to property prices being in a reasonable position combined with having fair lending opportunities. Due to this, Shane has reason to believe that this major price increase may not last that long if it’s not balanced by strong credit growth, no sudden changes to APRA’s regulations as well as the cash rate remaining at record low levels.

In summary, any industry will always undergo adjustments that are mainly focused in the area of supply, demand, prices as well as regulations. As of January 2020, we can expect no drastic changes except predictions of how the Reserve Bank of Australia could potentially cut the interest rates even lower than the current 1%. Prices are trending higher still, and auction clearance rates remain stable along the 70-80% mark based on the data from REIV. Ensure you keep track with our reports as well as subscribe to our newsletter to never miss an important update especially if you want to gain a competitive advantage in the Melbourne real estate industry.

Should you have any questions regarding any of your property needs, our experienced property consultants are always ready to assist you in your property journey.

Alain Warisadi,

CEA (REIV), CA (MFAA), TAA, CIT (M), CPS (RE), Dipl FMBM, B.Ec (Fin), FIML

Property Writer/ Property Consultant

Finance Consultant (Mortgage Broker)

Licensed Estate Agent

Harvard University Scholar

LinkedIn: www.linkedin.com/in/awarisadi/

 

Jeffrey Koby, B.BUS (MKT), M.MKT, CAR

Co-property Writer

Marketing Communications Manager

(e.) jeffrey.koby@xynergy.com.au 

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Jeffrey Koby

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