13 Dec What happened in 2018? What’s in store for 2019?

APRA and the RBA wish has been to slow down the 2 main property markets in Australia, Sydney and Melbourne without impacting the rest of Australia and they have achieved it. You see, if the RBA just increased the cash rate across Australia, which is what they would normally do to slow down the property market, then the other poorly performing states like Perth, Darwin, Adelaide and Hobart would have been impacted massively. APRA and the RBA targets were property investors and they have instructed the banks to abide by their new rules around investment lending, which has seen a massive drop in investment loans. One of the biggest impacts was the restriction of Interest Only lending and serviceability of the loan with a large focus on peoples living expenses. Let’s not forget the impact of the Financial Services Royal Commission.

So what has this done to the property markets? We have heard claims that property is going to drop by 40%, but let’s look at the facts of what actually happened in this past year. The average property prices in Sydney have come down by 8-9% and the average property prices in Melbourne prices have come down by 6-7% from the peak of the market to now and experts predict that this is not the end of it and we may see further falls in some property markets. Sydney’s Hill District has been the worst affected area, places like Castle Hill, Kellyville, Rouse Hill and Baulkham Hills etc where property prices have come back by almost 15%.

What are the hot topics that may impact the property market in 2019? Well, we have Labour’s negative gearing policy. Labour is proposing to remove the negative gearing tax concession for existing/established properties and only have it applied to brand new properties. If you already own an investment property or buy an investment property before the date this policy may be implemented (don’t forget they still need to win the election and then have it passed as law by the parliament) then your investment property and the tax concessions will be grandfathered. Experts predict that there may be a surge of property investors trying to buy an established investment property before this law comes into effect, although I think the savvy investors will wait till after the law takes effect, and secondly, rents will increase to compensate for the loss in tax concessions. One of the concerns for the RBA will be that both the Sydney and Melbourne property markets are falling in sync with each other and this is the first time this has ever happened in 30 years. The concern is that if 2 of Australia’s biggest markets are impacted at the same time and we continue to see further drops in Sydney and Melbourne’s economy, what will that do to the overall Australian economy?

I don’t have a crystal ball to tell you what’s in store for 2019, but I do know that property prices tend to increase over a long period of time. It’s not the first time there have been changes to laws around property, changes to bank policies, decreases in markets and a falling consumer confidence and it won’t be the last. The plan should be to expect external factors to impact the growth of your property as the market works in cycles and prepare for them. It wouldn’t be feasible for property prices to continually rising. We have to accept the peaks and troughs and the ups and the downs with any investment.

“There is no better than adversity. Every defeat, every heartbreak, every loss, contains its own seed, its own lesson on how to improve your performance the next time. ” – Malcolm X

Thank you for reading