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The Year That Was, and the Year It Will Be

December 10th

2019 has seen the market regain stability and it has settled back into a balanced rhythm, and as we head towards the end of the year, we are starting to see local property markets start to increase in value. In November 2019 we have just seen the biggest lift in Melbourne house prices since May 2015, which means that there will be a flow on affect to the Geelong market within 6 – 12 months. The low stock levels are impacting choice and driving competition, and the decline in purchases from investors will lead to a growth in rental income for established investments. The current competition is great for sellers looking to gain an edge going into the early part of 2020, and I predict that by March lending conditions will ease and start to compliment the current confidence of investors and home owners.

We have ended the year with the Reserve Bank maintaining the current cash rate with the hope that Christmas spending will be the catalyst for a strong start to 2020. Given the recent announcements referencing the declining profits of the banks, no matter what happens at Christmas, it is my opinion that we will start to see stronger borrowing conditions. This opinion is a little cynical, but I believe that if spending is strong; this will be the indicator that will allow lenders to be more giving in regards to borrowing; ‘confidence is up, so spending should be encouraged and borrowing will become easier’; the line of a more confident economy is the message that we will read. If spending is down, then we will need a stimulus; ‘banks to the rescue’, they will be our white knights and release the borrowing shackles. The 75 basis point rate cute from the Reserve Bank, a loosening of the loan serviceability policy from APRA and the cash injection via tax bonuses, have had a stabilising affect; but they have not generated the transactions that we normally see in the property market, and it is also not flowing through to consumer spending. To put this into context, we are currently experiencing the lowest property turnover rate in the last 30 years.

There is no doubt that property investors and homeowners have a solid level of confidence, but they are currently overestimating their ability to borrow and purchase. One of the main hurdles has been the shift to lending based on a candidate’s cash flow, as opposed to equity & investment income, this is having a restrictive effect on lending.
In short, the recent rate cuts have not filtered through to household consumption. On a national basis the number of new loan approvals, led by owner-occupier loans, is growing consistently with broader improvement in the housing market. Although investment lending has increased it remains relatively softer compared to owner-occupier loans well below long run average levels.


Taxation, lending and other factors play a role, but simple economics point to the fact that price, and therefore affordability, is first and foremost an issue of demand and supply. Unfortunately, current and emerging trends suggest housing supply may deteriorate further before it improves. Building approvals continue to fall sharply highlighting the extent of the residential construction slow down. Victorian dwelling building approvals declined by 21% in 2018-19. Similarly, vacancy rates have remained low, with regional Victoria vacancy rates around 1.3%, compared to that of Melbourne which was 2.3%.

Many of our major towns are faced by the challenges in the housing market including a lack of affordable housing. The problem is especially acute in areas where people want to live close to where they work. A growing population could mean that, over the medium to long term, affordability could continue to worsen. This will lead to falls in property ownership, increased prices and the increasing the distances travelled to and from work. This summarises the cycle of progression for the Geelong market. The population is shifting further out, but the desirability to be close to major employers is stronger than it has ever been. In the past 2 years, we have seen consistent competition for the established suburbs and the demand does not look like diminishing.

My crystal ball tells me that it is equally as good a time to sell as it is to buy in the current market, and this will remain the case in to 2020. I expect to see prices start to increase around March-April, with investment spending becoming a stronger factor by mid-2020. This we see a rise in rental yields, and vacancy rates will remain at low levels. The reserve bank of Australia forecasts economic growth to reach 2.75% over 2020 before increasing around 3% by the end of 2021. Victoria remains Australia’s best performing economy, and it continues to perform well across a range of indictors including population growth, retail trade, the employment market, and construction work done. Geelong is the strongest market in Victoria, so take confidence in the knowledge that the current balanced state of play is a good chance to take a breath and evaluate long term plans in readiness for 2020 & 2021.   

If you have any questions or would like to discuss further, please contact Nathan Ashton at Gartland
Property on 0418 566 708 or via email to

It’s all in the detail.
It’s all in the detail.
It’s all in the detail.
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