Predictions for the Property Investment Market for 2019

Last November, Domain economist Trent Wiltshire released a report, Property Price Forecasts, in which he predicted that 2019 would be “a year of greater stability” for the Melbourne market.

“That’s not to say prices won’t fall further,” Wiltshire clarified, “but the pace of those falls will slow in the first half of 2019 before we move into another moderate growth phase.”

Wiltshire expects Melbourne’s property fortunes will slowly turn during the latter half of 2019, with prices growing about four per cent the following year as buyers and lenders adapt to recent industry changes.

“Banks and potential borrowers should adjust to new tighter lending standards, with lending growth to resume but at a more moderate pace,” he explains in the report. “Also supporting house prices will be projected strong… population growth, lower unemployment, faster wage growth and increasing first-home-buyer activity.”

Wiltshire forecasts that Australia’s median house price will drop a total of 7 per cent from its peak of $820,000 in December, 2017, to around $760,000 in the middle of the year, which would be a return to 2016 levels. He tips the median price will grow 1 per cent by the end of 2019, and another 4 per cent in 2020. After units fell 3 per cent by December, 2018, Wiltshire anticipates their prices will grow by 2 per cent in 2019 and 3 per cent in 2020.

Though he has admitted he’s more optimistic than some other economists, Wiltshire isn’t alone in expecting improvements. Earlier this month, an article published in The Age cited KPMG research that found Melbourne’s property market will begin to properly bounce back in 2020, 12 months earlier than the Sydney market.

And in an article exploring Wiltshire’s predictions, Domain reporter Jim Malo spoke to HSBC chief economist, Paul Bloxham, who expects bigger declines than Wiltshire, but also noted the market appears to be cooling in “an orderly fashion so far… we think it will be a soft rather than hard landing”.

Two weeks into the new year, Wiltshire points out that a couple of factors still need to unfold before we get a clearer picture of what will happen next.

“The big one for the year is really what the banks are going to do, and big part of that is what the Royal Commission findings, which are due in February, are going to recommend,” he says. We know that banks tightened up their lending in 2018 and the big question is whether the Royal Commission will recommend that banks tighten lending further or if in fact banks have gone far enough in terms of verifying borrower expenses… and now they actually might start lending a bit more.”

While investors are currently holding off from buying and vendors are still reluctant to sell, Wiltshire says the lack of “stress sales” is a “promising sign”. “The underlying economy is going pretty well… The fundamentals are still there so that prices shouldn’t collapse.”

Based on forecasts that growth should return within the next couple of years, Kay & Burton’s head of property management, Carolyn Purnell-Webb, recommends that investors take advantage of the current cycle and make 2019 the year that they build wealth by expanding their portfolio.

And Carolyn isn’t just talking the talk; she’s walking the walk, with plans to build on her own personal investment portfolio this year.

“I’m looking for a two-bedroom apartment as an investment as they tend to lease very well. I’m looking around Prahran and South Yarra,” she says.  Having seen several property cycles throughout her 32 years working in real estate, Carolyn has become accustomed to the “swings and roundabouts” of the market.

“It’s just something that’s par for the course in the real estate sector,” she observes.

For investors wanting to build the portfolios, Carolyn says Kay & Burton can help them “every step of the way”.

 


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