2018: Australian property market soft landing

Soft landing

A soft landing is often needed when a market overheats. In a soft landing, governments and central banks often try to slow down the unsustainable growth but not to cause an economic contraction.

The Government has done a good job

Australia was one of the few economies that did not experience a large economic downturn or a financial crisis during the Global Financial Crisis. In 2018, the Australian government has again demonstrated its ability to fine steer the country’s economy by successfully engineering the property market soft landing.

Declining however still robust house prices being accompanied by low unemployment rate and a reasonably strong economy.

House price declination, or correction (to be more accurate), is within 10% overall for Sydney and Melbourne which is a moderate level. There are areas in Sydney and Melbourne have experienced bigger corrections.

The overall policy environment

APRA has removed interest-only lending cap, saying it has served its purpose. However strong lending standard will ramain. RBA cash rate is still low and is unlikely to increase significantly in the near future.

China still holds tight on foreign currency transfers, which is unlikely to change in the near future. This has played the major role in cooling down the Chinese buyers’ demand. Stamp duty for foreign buyers to buy a property remains high.

The government would like to divert some of the new migrants away from the major cities to manage the assolicated issues caused by fast population growth.

There might be a new set of policies after the Federal election.

World economy has more risks due to the trade war and the concerns on the reverse of globalisation. 

Preliminary finding

The overall policy environment suggests that future property market growth will be predominantly buoyed by growth in economy, Australian household income and population, which are all slow varying factors in the current policy environment. This then suggests that Australian property market may experience a slow and long recovery phase.

An accurate diagnosis of the current market condition can always shed light on the decision making for the market participarts.  For further inquiries, please contact us to book in a consulting session (https://www.realestatelogic.com.au).