10 big property market trends to watch for in 2019

Posted: 23 January 2019 1:41 pm

Suburban street in Melbourne.The year ahead looks to be a tumultuous one for housing, but there are silver linings.

2018 was a rough year for Australia's property market. After years of stratospheric rises, house prices hit a wall and began declining in late 2017, with falls throughout all of last year. National house prices ended the year 4.8% lower, according to CoreLogic.

But what will 2019 hold for the property market? Will it be another year of declining values, wary investors and regulatory hurdles? We looked at some of the top property forecasters' predictions for 2019 and identified the biggest trends we're likely to see in the year ahead.

10 property trends to watch in 2019

  1. 📉 The house price fall will hit its bottom
  2. 🌆 Sydney and Melbourne will still lag behind
  3. 🥇 Brisbane will be the star performer
  4. 🏙 Units will outperform houses
  5. 👷‍♀️ Construction activity will slow
  6. 👎 Home loans will be harder to get
  7. 🏩 Vacancy rates will climb
  8. 🏃‍♀️ First home buyers will return to the market
  9. 🔒 The RBA will sit tight
  10. 😥 Mortgage stress will rise

1. The house price fall will hit its bottom

House prices suffered throughout last year, but many forecasters agree that there's light at the end of the tunnel.

According to modelling by Domain, Australian house prices could find their floor midway through the year. The second half of 2019 could see modest growth, with house prices ending the year edging back to 1% growth by the end of the year. Domain predicted 2020 will see slightly stronger growth of 4% year-on-year.

2. Sydney and Melbourne will still lag behind

Sydney and Melbourne underperformed throughout 2018 to prove the biggest drag on national median prices. 2019 looks to be no different.

Sydney ended 2018 down 8.9% for the year, while Melbourne saw an annual decline of 7%. BIS Oxford Economics has forecast a further 3% fall for Sydney prices in 2019 and predicted Melbourne values will slide another 3% as well.

NAB painted a slightly rosier picture, with a modest 0.7% decline for Sydney and flat prices in Melbourne. However, most forecasters seem to agree that Australia's two largest capitals are unlikely to see prices rebound in 2019.

3. Brisbane will be the star performer

While much of the conversation surrounding house prices has been dour, not all of Australia's capitals have been struggling. Brisbane ended the year with dwelling values up 4.2%, according to CoreLogic.

Strong migration, job opportunities and relatively low median prices should continue to support the Brisbane market in 2019. Domain predicts 4% growth for houses and 3% growth for units over the year.

4. Units will outperform houses

Unit prices proved more resilient than detached house values in 2018. According to Domain, national median house prices fell 6% in 2018, while units fell a less precipitous 3%. In spite of media furore over unit oversupply, this trend is set to continue in 2019.

Domain believes unit prices will be flat to positive across every capital city in 2019. Sydney, the weakest performing capital city in 2018, is set to see units buck the trend as Domain forecasts the city will see the strongest unit price growth in Australia at 3%. Nationally, unit prices are tipped to edge up by 2% in 2019 before growing a further 3% in 2020.

5. Building activity will slow

Figures from the Australian Bureau of Statistics show that home building approvals fell in November 2018 to its lowest level since August 2013. The trend was driven by an 18.4% decline in multi-unit approvals.

The Housing Industry Association has warned that in spite of a record year for home building, 2019 is set to see new home construction plummet. Building activity is tipped to fall 7.4% throughout the year, possibly due to the glut of apartment building over previous years.

6. Home loans will be harder to get

The Australian Prudential Regulation Authority (APRA) put the brakes on interest-only lending and investor lending with caps back in 2016 and 2017. The banking watchdog has since removed the restrictions, but the lending landscape has become a more cautious one.

The fallout from the Hayne Royal Commission, which has painted banks and their credit standards in a less-than-favourable light, is likely to see lenders tighten their home loan criteria further. Already some lenders have announced more stringent vetting of home loan applicants, with Suncorp requiring mortgage borrowers to provide three months of statements for all credit liabilities.

7. Vacancy rates will climb

After years of tight rental markets, vacancy rates began to rise through 2018. Nationally, vacancies edged up to 2.5% by December 2018, with Sydney vacancies rising from 2.6% to 3.6% year-on-year.

With a glut of apartment building, it appears vacancies are set to rise further in 2019. SQM Research's Louis Christopher has predicted that if vacancies continue to rise in January and February, "Darwin, Sydney, Brisbane and Perth will be a tenant's market in 2019".

8. First home buyers will return to the market

One of the silver linings of the housing downturn has been improved affordability. The latest REIA/Adelaide Bank Housing Affordability Report found that the proportion of median family income required to meet average home loan repayments fell 0.8% to 31.4% in the September 2018 quarter.

Declining house prices have managed to woo some first home buyers, with ABS figures showing first-time buyers represented 18.3% of the market in November 2018, up from 18.1% in October.

Expect more first home buyers to slowly trickle into the property market as house prices fall and declining auction clearance rates see vendors become more aggressive with discounting.

9. The RBA will sit tight

You could be forgiven for forgetting that the Reserve Bank actually has anything to do with interest rates. After all, children born around the time the RBA last changed the official cash rate would be walking, talking and mostly toilet trained by now.

If you're looking for RBA action, 2019 is likely to disappoint. The Reserve hasn't changed the official cash rate since August 2016, and most economists agree 2019 will be another year of stable rates. However, this won't stop lenders from making their own interest rate moves.

10. Mortgage stress will rise

Mortgage stress took a sharp upturn in 2018. According to Digital Finance Analytics, 30.9% of Australian households were experiencing some form of mortgage stress as of November 2018.

The news for 2019 isn't set to get much better as the RBA has estimated that $360 billion in interest-only mortgages will roll over to principal and interest repayments over the next three years, slugging mortgage holders with an average of $7,000 a year in extra repayments. Add to this falling house prices that look set to push many high loan-to-value ratio homeowners into negative equity, and 2019 could be the year many Aussie households find themselves struggling.

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