Slowing residential headwinds bring market bottom forward

The residential downturn is expected to reach bottom in most Australian markets by as early as the end of 2019 or early 2020 – much sooner than previously predicted. 

This is one of the findings from CBRE Research’s recent Australian residential ViewPoint, Known unknowns – where to now? – released ahead of this afternoon’s anticipated RBA interest rate cut. 

The report follows CBRE’s Real Estate Market Outlook 2019 report, released in February, which identified the Banking Royal Commission and the federal election as the two ‘unknown’ factors influencing Australia’s residential market outlook.

Report author and CBRE’s Head of Residential Research, Craig Godber said signs were now emerging that a controlled relaxation of credit constraints was being managed and forecast interest rates cuts would help stabilise property prices.

“The strong likelihood of further rate cuts by the RBA over the remainder of 2019 is expected to boost the prospects of an earlier than anticipated market recovery,” Mr Godber commented.   

Mr Godber added that the results of the Banking Royal Commission and federal election would provide some comfort across the remainder of the year, increasing the number of buyers looking to enter residential markets, providing stronger support for prices and bringing forward the cyclical market bottom into 2019. 

“The federal election’s unexpected result and the relaxation of certain credit market constraints have provided a catalyst for market change,” Mr Godber said.

“The Coalition victory means proposed taxation changes impacting investment property, including negative gearing and capital gains tax changes, are off the agenda, while first home buyers have received a modest additional assistance package. The residential markets in general are expected to continue working through their adjustment cycle, with credit availability remaining the key constraint at present.”

Mr Godber commented that the results of the Banking Royal Commission were creating a more sustainable credit environment underpinning residential markets, resulting in an arguable credit market overcorrection, with banks appearing to have adjusted their requirements to reflect ‘responsible lending’ practices.

Download the report here.