Sydney and Melbourne property market driving national price growth

In good news for homeowners looking to sell, and bad news for would-be-buyers, national residential property prices are rising again.

Statistics released today from the Australian Bureau of Statistics (ABS) show that residential property prices rose 2.4 per cent in the September quarter 2019.

Sydney and Melbourne saw strong growth in the September quarter 2019. Property prices in rose 3.6 per cent in both of these capital cities. Sydney experienced its first quarterly growth in residential property prices since June 2017. Melbourne also experienced its first quarterly growth in residential property prices since December 2017.

Brisbane and Hobart also saw growth of 0.7 per cent and 1.3 per cent respectively. This quarterly growth in residential property prices could be a step in the right direction for homeowners looking to sell in those capital cities.

Meanwhile, ABS data reported that residential property prices fell in Perth (-1.2 per cent), Adelaide (-0.3 per cent), Canberra (-0.5 per cent) and Darwin (-1.2 per cent) this quarter.

However, ABS data shows that the growth in Sydney and Melbourne has been enough to have the strongest quarterly growth in residential property prices nationally since 2016.

Would-be-buyers may find themselves feeling the pinch. Although, with home loan conditions as they are, mortgages have never been more affordable. They may continue to improve well into 2020.

Improving home loan conditions

There are a few reasons home loan conditions may keep improving in 2020:

• Low rates

Three Reserve Bank of Australia cash rate cuts in 2019 have created a perfect environment for record low mortgage rates. According to RateCity research, the average variable owner occupier rate for November was 3.89 per cent, and 4.24 per cent for investors. Despite high property prices, home loans have never been more affordable in terms of interest rates.

• More cash rate cuts

Another cash rate cut has been tipped to occur as early as February 2020. This may make the home loan market even more affordable for would-be-borrowers and refinancers alike. New homeowners may also have a chance to seriously pay down their debts too. If they keep making the same mortgage repayments even with a rate cut, they could potentially shave years and thousands off of their home loans.

• Reduced serviceability floors

Lenders across Australia have also reduced their serviceability floors thanks to historic low rates. Previously, lenders would test your ability to repay a loan if rates rose to at least 7 per cent. Now, banks set their own ‘floor’ rates, approving loans as long as borrowers can still make repayments if the lenders’ standard variable rates were to rise by 2.5 per cent. Borrowers may find their applications being approved much easier, and for thousands more.

• First Home Loan Deposit Scheme

Starting 1 January 2020, the First Home Loan Deposit Scheme will be accepting applicants. The initiative hopes to help first home buyers get a home sooner by eliminating paying lenders mortgage insurance. The government will guarantee eligible first home borrowers on low and middle incomes to purchase a home with a deposit as little as 5 per cent.

Whether or not potential demand for residential property drives up the property value is unknown as of yet. But it’s safe to say that, for borrowers, the home loan environment is ripe for the picking.

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