Confidence has returned to the market

Regulators have reduced interest rates and eased lending standards – and households have responded.

After a few months of positive signs, we can now say with certainty that the property market has rebounded and confidence has returned.

Want proof? Here are six signs that the property rebound is real.

1. Buyer demand has stopped falling

Demand for detached homes fell during the downturn, but that fall has now stopped, according to the latest quarterly outlook report from the Housing Industry Association.

“Three cuts to interest rates, income tax cuts and the easing of APRA [Australia’s banking regulator] restrictions are having a positive impact on confidence.”

2. Property prices are rising again

CoreLogic reported that national property prices rose in November, by a strong 1.7%.

That represented the fifth consecutive month of growth, following an 8.4% contraction between October 2017 and June 2019.

Prices rose in seven of the eight capital cities in November, with Darwin being the lone exception.

3. More people are taking out home loans

More and more Australians are taking out home loans, according to recent data from the Australian Bureau of Statistics.

You really notice this lift in activity when you compare shorter-term statistics (which cover just the rebound) with longer-term statistics (which cover both the downturn and the rebound).

For example, investor borrowing fell 8.7% over the 12 months to September. However, it rose 5.7% over the last six months of that period and 6.8% over the last three months.

Owner-occupier borrowing rose 5.5% over the year, but surged 12.4% over the half-year and 12.5% over the quarter.

4. More people want to enter the market

The latest edition of the Commonwealth Bank Household Spending Intentions series, which included data to the end of October, observed a “sharp uptrend in home buying intentions”.

“Home buying intentions rose further in October and are now close to the record highs seen in [the first half of] 2017,” CBA reported.

5. Housing affordability has improved

The latest ANZ-CoreLogic Housing Affordability Report delivered good news on housing affordability.

At the end of June, the price of the average property was 6.5 times greater than the average gross annual household income – the lowest level since December 2013.

Improved housing affordability is likely to bring more buyers into the market, which helps explain why the report forecast that national property prices would reach record-highs in the first half of 2020.

6. It’s become easier to service a mortgage

The ANZ-CoreLogic Housing Affordability Report also found that households are dedicating the smallest proportion of their income towards servicing a mortgage since 2004.

Australians can thank record-low interest rates for that position – which is likely to have further improved given that interest rates have fallen since the report was published.

Two property guidelines you should always follow

If there’s one thing that history has taught us, it’s that the property market moves in cycles.

Australia experienced a boom from 2012 to 2017, followed by a two-year downturn. Now, prices are rising again, but they won’t rise forever. Eventually, they’ll start going backwards; but that won’t last forever either.

Regardless of market conditions, there are always two guidelines you should follow – don’t overpay for a property and don’t borrow more than you can afford.