In recent months, the decline of the Australian property market has been a hot topic, leading to much speculation about what the future holds. We have seen the property market fall 11.4 percent since it peaked in 2017, prompting many of us to contemplate whether this is the right time to enter the market.
However, is this decline enough to make purchasing a property more accessible for first home-buyers? With the last five years seeing median house prices rise as much as 50 percent in some major cities, is a decrease of 12 percent and 15 percent in Melbourne and Sydney respectively enough to help people get on the property ladder?
Maybe for those who have been sitting on the sidelines, deposits ready, 2019 may present the right time to purchase their property. Whether this is going to be the big break in the property market that many of us need to get on the ladder is doubtful.
In the major cities, the demand remains; take Sydney for example. Despite small declines, the median house price remains at $1,062,600. Earlier this month, Domain reported that a dozen suburbs had dropped below the million-dollar mark, sparking some hope for buyers, however, with wages remaining stagnant this is still out of reach for many.
Deciding when to make a property move isn’t just for first home buyers. For retirees and those nearing retirement, the focus is around the right time to downsize. While many want to take advantage of the government’s ‘Downsizing Measure’, which allows individuals to contribute $300,000 of the proceeds from the sale of the home into superannuation, they also need to be mindful of market conditions. It is key for those in this category to understand both the return they will get on the sale of their property in the current market, and whether there will be a suitable property to buy, with less housing stock on the market.
Whether you are a first home-buyer, or you are looking to upgrade or downsize your property, it is important to keep an eye on the market. Here is our round-up of the issues that may impact the property market in 2019:
- Banking Royal Commission findings
In early February, the final report from the Banking Royal Commission was released, and it will spark changes to the way home loans are handled. While much of the speculation around a further tightening of lending criteria has remained just that, there have been some changes that have the potential to impact the market.
One of the key changes is that mortgage brokers can no longer receive commissions from financial institutions. And while this may sound good for the consumer in theory, the reality may be that we see a ‘user-pays’ system for mortgage broking. Whether consumers will want to pay for mortgage broking remains to be seen. If they don’t, we might see more people going directly to the big four banks, reducing competition and increasing the likelihood of rate rises. In 2018, we saw banks make a slight increase in interest rates and with so many Australians carrying large mortgages, even a small rise can have an impact on the wider market.
- Changes to interest-only loan restrictions
In 2017, The Australian Prudential Regulation Authority (APRA) put restrictions in place to curtail interest-only lending. Given there has been a decline in the market, APRA removed these restrictions as of 1 January 2019. While this is not tipped to have a huge impact on the market, with interest-only loans sitting below the cap APRA put on them anyway, it may lead to cheaper interest-only loans for borrowers.
- Election year
With a federal election due by May this year, the prospect of a change in government may make people reluctant to make any major property decisions in the next six months. With many unsure of the knock-on effects of a change of government, especially with Labor’s proposed changes to negative gearing and capital gains tax (CGT) plans, it can make people less likely to make big financial decisions until there is some certainty in Canberra.
- Continuing market volatility
Continuing uncertainty in global markets, with big issues such as Brexit and the US-China Trade War on the table, is tipped to continue to have an impact on local markets.
Property decisions are not something most of us make lightly. In this environment, with so many factors at play from a looming election, proposed changes to franking and capital gains tax, to the uncertainty of global and local markets, it’s important you have access to the knowledge you need to make the right decision. A financial planner can take into account your personal situation and goals as well as broader market decisions to help make the right decision for you.
General Advice warning
The information provided in this blog does not constitute ﬁnancial product advice. The information is of a general nature only and does not take into account your individual objectives, ﬁnancial situation or needs. It should not be used, relied upon, or treated as a substitute for speciﬁc professional advice. Apt Wealth Partners (AFSL 436121 ABN 49 159 583 847) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.