Boost to Property Market Confidence
Big economic and political changes in the past few weeks have contributed to early signs of a turnaround in property market confidence.
First, the Coalition’s unexpected victory in the federal election means there will be no changes to negative gearing and the capital gains tax discount. Labor’s proposed changes to these had weighed on prices, and were likely to see prices fall a bit further.
Second, the Reserve Bank has cut interest rates to an all time low.
Third, the banking regulator, APRA, is planning to remove the requirement for banks to assess a borrower’s ability to repay a loan at a mortgage rate of at least 7 per cent. Instead, banks will be required to use an assessment rate of 2.5 percentage points above the offered rate, which will effectively mean the maximum amount an applicant will be able to borrow will increase by about 10 per cent (and even more if the RBA cuts interest rates).
Another proposed change is the government’s first home loan deposit scheme, which will enable first-home buyers with a small deposit to buy a home earlier, should also provide a boost to the lower-end of the market.
There is some early evidence that potential buyers have responded to these changes almost immediately.
According to data from Domain Group the average number of Homepass check-ins per listing Australia-wide jumped 11 per cent in the week beginning May 20 (the first week after the federal election) compared to the average of the previous four weeks.
Other indicators also point to a turnaround in buyer interest. Commonwealth Bank chief executive Matt Comyn stated that loan applications the other week were the highest in six months, and agents also reported a jump in buyer interest.
On the other side of the market, the big changes over the past few weeks may influence more people to put their properties on the market.
Data from Domain Group shows that the number of people seeking a property appraisal jumped by 10 per cent in the week beginning May 20, compared to the average of the previous four weeks. The biggest increases were in Tasmania and Queensland.
But remember, these are only early signs. While a few early indicators point to renewed buyer interest and more seller activity, these signs should be interpreted with caution. Property prices are still falling, consumers still think prices have further to fall, lending conditions remain tight, housing affordability is still a problem, and the RBA is only thinking about cutting interest rates because of a weakening economy.
While the big changes over the past few weeks suggest a bottoming-out of the market in 2019 is now more likely, it’s no guarantee.
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The above information has been sourced from Domain. To read the full article CLICK HERE.