The factors likely to determine the market in 2020
The property market is expected to enjoy a good year in 2020 after a robust recovery in the second half of 2019. An extreme set of factors hover over the market as we commence 2020. The extremities, which are both positive and negative forces, could conceivably fuel the ‘recovery turned boom further’ or cause another correction.
Being aware of the critical factors that will inevitably influence and/or move the market is essential to anticipating the markets’ direction in 2020.
These critical factors can create changes in the direction of the market. The secondary yet influential issues then consolidate that direction.
Credit Conditions
Markets globally seem to be risk on again. Further easing by the RBA in 2020 is predicted, which will fuel property markets. At this stage, APRA doesn’t seem to have any desire to slow the property market down either. If and when interest rates are reduced, this increases buyers ability to pay more in the property market.
Population Pressure
The population continues to grow annually. This population growth creates economic activity and benefits the property market. Population growth benefits the property market in both rental demand and buyer demand. Those that claim population pressure also impacts on the quality of lifestyle are correct. But whilst ever population growth continues to underpin the Government’s economic performance, expect more people to move into town, literally.
Population pressure has been one of the most overlooked factors in the stellar market performance of Sydney and Melbourne over the past 20 years.
Stock Levels
If stock in the housing sector is tight relative to demand, prices will rise. We anticipate this to be the case in the first half of 2020. This is unlikely in the apartment sector which is suffering from oversupply.
Rents/Yields
Landlords have experienced flat to falling returns over the past few years. As prices rise and rents fall, yields get compressed, acting as a deterrent to pragmatic investors.
Buyer Confidence
The longer the recovery persists at these price levels, the more confidence buyers will have in the stability of the overall market. Paying a high price to buy a home is less scary if you are confident others would want to buy it from you, if and when you decided to sell it. Hence the importance of buyer confidence in a property market that has record low yields.
Speculators
As yields across all asset classes fall, the hunt for a decent return is on. If the signs are that housing will continue to rise, those speculating on gains will pile in, creating further upward momentum on property prices.
Employment & Economy
Job security is a continued concern across the economy, particularly those connected to the construction sector. Anticipating the performance of the market in 2020 is difficult to predict because the price trajectory is strong, yet the economic signals are weak. This equation is clouded further due to the damage caused by the bushfires and what the recovery effort will look like. The Government has announced a $2 billion rescue effort for the fires, which will be prioritised over a surplus.
If you’re thinking about selling in 2020, find out how you set the right price for your home.
