Until last May, the national political campaign had industry leaders and experts worried. Labour’s reform package included increased taxes and regulations targeted at businesses and the wealthy.
Morrison’s government’s surprise win soothed the business community. It signalled two facts that the polls missed. First, Labour’s program was not as popular with the general public as assumed. Also, it meant that business and industry across the board could expect consistency in the government’s treatment.
Only a few months after Morrison’s victory and other government moves, the housing market has taken off dramatically in Sydney and Melbourne. According to CoreLogic metrics, there has been a growth of 1.6 per cent in property prices in Sydney, while Melbourne has witnessed a 1.4 per cent leap.
The rising prices reflect the dramatic surge of interest in home purchasing, as well as the quick depletion of available stock in Sydney.
Reform and Political Calm Boost Confidence
The election results brought confidence to business and industry, especially housing. The government continued to back and implement policies to gradually reduce the impact of regulation.
As Paul Biller, Principal of Biller Property in Double Bay explained to ABC “Since the [federal election], there’s certainly a lot more confidence and there are more homes hitting the market.”
While it has not rebounded as quickly as many would like, it does demonstrate market confidence that has been lacking for some time.
Another positive sign of market resurgence comes from the impact of the Morrison government’s implementation of relaxed regulations in home lending. These followed recommendations from the Royal Commission on Banking.
Critics claimed that the old rules prevented many worthy applicants from getting home loans. The reforms also allowed for more expedited pre approvals for qualified first time home buyers.
Some say that the housing boom may only see expanding prices in the short term. With new housing stock expected to hit the market early next year, more options could cool prices.
Interest Rate Cuts Spur Sales in Sydney But Not Elsewhere
Back to back interest rate cuts have also contributed to the surge in home buying. Some claim that these have made mortgage prices equivalent to lows not seen in six and seven decades.
Low-interest rates combined with other factors have worked to bring more buyers to the market. They may have also helped to create a solid foundation for long term growth.
As CoreLogic’s Tim Lawless explained to the Sydney Morning Herald, “While the recovery trend is still early, it does appear that growth trends are gathering some pace, particularly in the largest capital cities.”
First Time Home Buyers and Others Get No Relief
Others have not enjoyed the benefits of the developing housing boom in the country’s two largest cities. Increasing prices of middle to high priced homes have blocked many first time home buyers from the market.
Despite reforms aimed to help, rising home prices and stagnating wages make home-buying unaffordable. Declines in apartment rentals created by plentiful stock have made leasing more viable for now.
Outside of Sydney and Melbourne, the housing recovery has not yet occurred. Population outflows in areas such as Darwin have not created a supply issue. Plentiful stock combined with low demand will likely continue to keep housing prices lower than normal.