A research expert says decisions should not be made on today’s market results
As we come into 2020, a researcher has said that real estate is as good now as it has been for many years – predicting that the growth of median dwelling prices over the next five years will be superior to the last five.
Head of research at buyer’s agency Propertyology, Simon Pressley, said the price growth in future years will be more widespread, rather than being concentrated on a select few locations.
He also cautioned that in this upcoming year, property buyers would be wise to make decisions based on what the medium-term fundamentals actually say, rather than focusing on today’s market results. Propertyology looked at fundamentals such as interstate migration, job advertisements and airport passenger growth.
A sugar fix of the property markets
Analysis from Propertyology found the price growth in Sydney and Melbourne in the latter half of 2019 posed some risk that uneducated buyers could be lured in to thinking that Australia’s two most expensive capital cities were about to start a new market cycle.
“The 2019 mid-year momentum change in Australian property markets was triggered by the stimulus of three interest rate cuts. It’s a sugar fix of sorts. But it doesn’t change underlying fundamentals,” said Pressley.
“While a quick burst of sugar on occasions doesn’t hurt anyone, we all know that sugar is not a sustainable energy source.
“Those contemplating participating in 2020 property markets would be wise to focus on the fundamentals of a balanced diet.
“Within a year or so, these current stimulatory policies will be gone, and Australia’s best performed property markets will be the ones that always had the strongest fundamentals.”
Forecasting property price growth a “futile exercise”
Pressley said there was nothing orderly about Australian property markets at present with wild swings from deep downturns to supposed strong growth periods all signs of unstable – and not superior – market conditions.
“Given the significant policy disruptions, I consider it to be a completely futile exercise to attempt to forecast actual rates of property price growth for 2020 and anyone who buys property based on the potential of a one-year result is in the wrong game anyway,” he said.
Pressley said that, generally speaking, the outlook for Australian real estate is as good now as it has been for many years.
He said savvy property investors would not be blindsided by the sparkly lights of Sydney and Melbourne this year because there were plenty of superior investment locations elsewhere.
“There is a fork in the road right in front of us. While both roads might appear to be smooth, there’s actually a narrowing of lanes just around the bend of one road. The other road appears to offer a much smoother run to the destination,” he said.
“For help in deciding which road to take, one would be wise to pull out the map and reflect back on 2009 and 2010 because it is a recent template for the impact of stimulus on property markets and the importance of objectively reviewing market fundamentals before making real estate decisions.”
