Predicting Australian property trends in 2020
Property predictions are a mug's game. Nevertheless, here are six of them.
For better or worse, 2020 looks to be a very interesting year in Australian property. Interest rates have never been lower, economic uncertainty lurks in the background and prices look set to rise once again.
Many other wildly dissimilar factors, from digital finance technology to climate change, also look set to change the industry in big ways.
Prediction is a mug's game (look at how many of our predictions for 2019 came true). And we're all playing with data, interpretations and gut feeling that change every week along with market conditions.
But you've got to be in it to win it, so here's what I think will happen to Australian property in 2020.
Interest rates will get even lower
If the cash rate drops another 25 basis points we can expect to see home loans falling as low as 2.50% (give or take).
This will only fuel prices, as borrowing costs drop.
Prices will rise to new peaks
Property experts love to call it a boom. And I'm afraid they look to be right. Conditions in 2020 look perfect for rising prices. In fact, it's already happening.
Low interest rates will be a big factor. Credit availability is another. Lender guidelines are a bit looser now than two years ago, and this has a big effect on prices too.
Even a hypothetical recession probably won't hurt prices. It may actually boost them further.
(I am a would-be first home buyer and I take no pleasure in reporting any of this).
Housing affordability will plummet again
This follows naturally on from rising prices. Affordability will plummet in 2020 back to 2017 levels or worse.
There doesn't seem to be a lot of support for new buyers in policy terms either. The First Home Loan Deposit Scheme starts on New Year's Day but it's very limited in scope.
Maybe an unexpected bout of wage growth will offset higher prices and lift affordability. That doesn't seem likely though.
Homelessness will rise
Homelessness has risen in Australia over the last few decades just as property prices have risen. According to the last Australian Census in 2016, homelessness rose 13.7% in five years.
You can see just how much Australian property prices rose in the same period in the graph below:
There are many factors affecting homelessness, but it's impossible to ignore the connection between higher prices, affordability and more people ending up on the streets.
More borrowers will go with digital banks
2019 saw some new digital lenders enter the mortgage industry. Athena Home Loans launched an online-focused, competitive mortgage set in February.
In November, digital bank 86 400 entered the market with a digital loan offered via brokers.
Both challengers offer users more visibility over their financial data and promise faster, easier service than the big banks and at a lower cost.
2020 will see more digital upstarts enter the market and shake up the lending game.
The property market will start taking climate change seriously (maybe)
As I write, it's a record-hot day in Melbourne and the entire city is shrouded in ashy smog from unseasonal bush fires in NSW.
Climate change is here and it is already affecting our lives in drastic ways. In 2020 it's inevitable that climate change will start to affect the property industry in multiple ways (read how it's already affecting the insurance industry here).
Expect to see environmental factors influencing prices like never before, a greater emphasis on sustainable construction methods and energy efficient homes selling at a premium. The cost of climate-proofing properties could also see an even bigger gap between housing quality and affordability, as Australians with fewer resources struggle to keep up.