After endless doom and gloom it is nice to see some positive news around the property market!

Non-market impacts

My own view is that property prices over the last 8 months have been impacted by a series of non-market related issues.  These follow issues in the preceding 12 months that included restrictions on and fees for foreign buyers, tighter lending standards and rising taxes and charges.  These non-property market issues include:

  • The Victorian State election in November, 2018;
  • The NSW State election in March, 2019;
  • The Federal election in May, 2019;
  • The Banking Royal Commission; and
  • Christmas 2019.

I believe that the collective impact of these events on consumer confidence is not widely appreciated.

To give you a simple illustration, whilst I was studying, I worked in a florist shop.  Every time a Victorian or Federal election was called sales dropped 10% and stayed down until after the election.  If the average sale was $5.00 this meant that 1 in 10 people felt sufficiently unsettled by an election that they would prefer not to spend $5.00 on a bunch of flowers.  I have seen anecdotal suggestions that the impact on larger items such as appliances and cars is larger than 10%.

This lack of confidence and sense of limbo in the property market must have been amplified by the repeated media doom and gloom headlines about falls in the property market.

Therefore, faced with these headwinds, it isn’t surprising that property prices have fallen.

However, I am hearing anecdotal stories that the market is much improved since the May election.  More buyer interest, more inspections and improving prices.

Property prices

Recent statistics that suggest that price declines in Melbourne and Sydney have been replaced with very small price increases in the past 3 months support my point of view.

Looking forward, I believe that the forecasters are underestimating the extent to which the property market will bounce back.  There are early signs that lending restrictions are easing, our population is still growing, employment levels are relatively good, interest rates have declined and government regulation and charges continue limit the supply of and raise the cost of new homes.

I don’t claim to have a crystal ball, but now could prove to be a good time to buy property.