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Researcher's Predict Property Prices to Increase in 2019

Positivity is alive and well in the world of economic commentators, with Paul Rickard from switzer.com.au suggesting property prices could rise this year. 

 

Reasons include:

  • Lending Criteria. APRA, the banking regulator relaxing lending rules so borrowers can get a loan easier. Investor loans were a target, with banks limited as to how many loans banks could approve on interest-only terms. While it is still harder to get a loan today than it was 18 months ago, borrowers can expect to see a “warming up” to lending. 
  • Interest Rate Outlook. Six months ago, most economic commenters were predicting a pending rise in rates, with many more predicting a possible drop in in rates, or at the very least, more stability at the current level for a long period. 
  • History. While this isn’t always a reliable indicator, the last two big housing market slumps (GFC 2008/2009 and Paul Keating’s time in office 1990/1991) may be a fair indicator of the of where we are at. The peak falls for Sydney and Melbourne sit at 13.9% and 10.3% respectively, which is roughly what we are seeing now. 
  • Labor’s Policy Change Date. Shadow Treasurer, Chris Bowen announced last week that the Australian Labor Party’s changes to negative gearing and capital gains tax (if elected at the upcoming federal election) will not be put into place until 1 January 2020, providing a substantial window for investors to get in the market prior to this date. From 1 Jan 2020 onwards, investors will no longer be able to negatively gear newly acquired properties. Under the policy, investment properties purchased prior to this date will still qualify for allowable deductions on rental income but rental losses won’t be deductable against other income such as wages or salaries. The capital gains element of the policy is considerable, with the current policy allowing an investor a 50% discount off capital gains if they have held the property for more than 12 months, but if the ALP take up government, investors who purchase post 1 January 2020, will only receive a 25% discount. This could be a huge incentive for investors to get into the market by the end of the year. 

Hannah Schuhmann said there are a lot more positive reports coming from property researchers lately. A recent report from Moody's indicated QLD House prices will rise by 0.9% this year, and 5.9% in 2020. It's an excellent time to get into the property market as opposed to wait and try to time it. In Hannah's view, only 10% of buyers who try to time the market actually succeed.

 

Watch this space. 37 days until the Federal Election. 

 

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