Back to back interest rate cuts have played a key role in sparking a rebound of home prices in Sydney and Melbourne.
According to CoreLogic, house prices in Sydney jumped by 1.6 per cent while those in Melbourne trailed only at 1.4 per cent. Lower interest rates have encouraged many to take advantage. While the home may cost more upfront, lower payments over time can relieve some of the bite.
Experts do not only credit interest rate drops as a reason. The Morrison government’s market-friendly moves have also helped.
While the housing market has seen gains in the country’s two largest cities, gains nationwide continue to be uneven. This has created mixed opinions on the strength of the housing market rebound.
Important Reforms Stimulate Market for Property Prices in Sydney
The Royal Banking Commission’s slate of proposed reforms, as implemented by the government, have also helped the turnaround.
Many of their suggestions followed by the government have lightened the regulatory burdens that prevented many otherwise qualified applicants from obtaining a loan. The government also allowed changes that permit expanded and expedited pre-qualifications for certain first time home buyers.
Last May’s election that surprisingly returned the Morrison government has also had a salutary effect. Many in the industry feared the potential impact of the Labour Party’s economic and housing proposals. While Labour argued that they would prevent “chaos,” the market has reacted favourably to the certainty and predictability of the current administration.
Not every group or geographic area has seen even gains, however.
Rest of Country Still Not Seeing Stimulus
Outside of Sydney and Melbourne, the housing market continues to struggle. In some cities, such as Darwin, the beneficial policies implemented by the government have been unable to overcome negative local trends.
For example, Darwin has seen consistent outflows of the population in recent years. This has freed up more housing stock. With increasing supply and dwindling demand, Darwin and other cities facing the same challenges will struggle to see their own housing markets rebound in the way that Sydney and Melbourne have.
First Time Home Buyers Left Out
Also significant, first time home buyers have found themselves increasingly frozen out of the marketplace in Sydney. The mitigating impact of lower interest rates on rising home prices does help. Unfortunately, the Sydney area has also seen stagnating wages. These hinder their ability to invest in a new home.
Also, apartment rentals have become more attractive. Rising levels of apartment housing stock have created more available units, keeping rents stable and in some cases, creating slight declines.
The housing price boom may be temporary, however. Large numbers of additional newly constructed houses will enter the market next spring. This could have a cooling effect on prices, or it could help an industry with a shallow pool of options better meet demand and spur even more growth.
While the rebound has not come as quickly or as powerfully as some desire, the government’s policies and resulting improvements in the housing market are seen by most as a strong sign of recovery.