Property market; CRE lending enter 2020 on a high
Australia’s property market begins 2020 in a strong position after Australia’s property market registered its fastest quarter of growth in a decade at the end of 2019.
When it comes to price growth, few periods in Australia’s property market can match the final three months of 2019. Nationally, prices rose 4.0% over the December 2019 quarter.
All Australian Eastern capitals experienced rising prices, with Sydney and Melbourne again leading the way. Prices in Australia’s two largest cities rose by 6.2% and 6.1% respectively. However, the property markets in Brisbane (2.4%), Hobart (3.4%) and Canberra (3.1%) also performed strongly.
To put these numbers in context, the last time there was such widespread price growth across Australia’s property market was in November 2009 – more than a decade ago.
Despite this strength, Sydney prices remain -6.4% below their 2017 peak, even though the average Sydney dwelling sold at auction reportedly now goes for almost $60,000 above its reserve. In Melbourne, the median dwelling price is still -2.3% below the peak. At the same time, interest rates remain at record lows, the Commonwealth government’s First Home Loan Deposit Scheme is now in effect and lending to owner/occupiers is on the rise.
This is all good news for property investors and developers, as it suggests there may well be more growth to come over 2020.
Perhaps the only statistic detracting from this overall positive trend is developer lending. The same ABS figures that reveal owner/occupier lending on the rise also show that new loans for construction fell -10.1% in October 2019 and -4.3% year on year, when seasonally adjusted.
Put simply, if the housing supply to rise enough to meet growing demand, developer lending will also need to increase. And yet, the banks’ traditional lending model is increasingly ill-equipped to meet it.
For this reason, we believe that 2020 isn’t just shaping up as a positive year for the property market; it should also be a positive one for CRE lending.