Real Estate Trend in 2019 - What happened?

1. The Australian property market is expensive!

2. The market moves in cycles from boom to bust

3. Market sentiment dramatically affects the property cycle

4. We allow the doom and gloom to influence us

5. You can't predict the unpredictable!

6. There's more than one property market

7. Follow the demographics

8. Capital growth over cash flow

9. Be wary of investing in high-rise apartments

10. The stimulation of banks and interest rates


What Happened in 2019?

What a year 2019 became for housing market news! We started the year off with continued doom and gloom from 2018 and finished it off heading back to a boom. This turnaround came as a huge surprise to many analysts and experts as we essentially saw two different housing markets. 


Sydney and Melbourne battled their way back after the Morrison government win, combined with stimulation from interest rate cuts, APRA loosening lending criteria and other factors that brought us back from the doldrums.


So what did we learn from all of this? Let's take a look at the real estate trends of 2019 and what we can take away from the year that was as we move forward:


1. The Australian property market is expensive!

OK, so this isn't exactly news. It's been this way for roughly fifteen years and unfortunately, the recent correction in prices did little to alter the stats.


According to the 2019 Demographia Housing Affordability Survey, "the median multiple of house prices to income is 5.7 times in Australia versus 3.5 in the US and 4.8 in the UK." In Sydney it's 11.7 times and Melbourne is 9.7 times. 


The data also shows that "the ratios of house prices to incomes and rents relative to their long-term averages are at the high end of OECD countries" and this is resulting in high levels of household debt.


2. The market moves in cycles from boom to bust

As history shows, the property market has a usually predictable cycle moving from boom to bust and bust to boom.


Contrary to popular opinion, this is not exclusive to a marked period of time such as the often touted seven to ten-year cycle. In fact, boom to bust is influenced by social and economic factors such as market sentiment and the manipulation of interest rates. 


The Australian property market in 2019 is a prime example of this. After the coalition's federal election, buyer confidence soared and APRA finally loosened the screws on lending after tightening them up in 2017. 


Understanding how these real estate trends work should give you the confidence to buy and sell, knowing that after a downturn there will be a boom again - and so on it repeats!


3. Market sentiment dramatically affects the property cycle

As mentioned above, buyer confidence or market sentiment has the power to drive the property cycle. As human beings, we are often ruled by emotion, and it seems so are our property markets.


The majority of us also like to do what everyone else is doing. This is often referred to as "crowd psychology", which is described as "bullish" when prices are rising and "bearish" when prices are falling. 


"As human beings, we are often ruled by emotion, and it seems so are our property markets."


As market sentiment grew with confidence after the Federal election, so too did house prices in 2019 in leading markets like Sydney and Melbourne, while auction clearance rates rose by up to 75%.


As these figures increase, investors make their way back to the game. On the flip side, low sentiment will see people saving more money and reducing spending in the retail sector and in property investment, which can have a negative outcome for the economy and drive unemployment. 


Ironically, market sentiment is highest at the peak of the cycle when people should be exercising caution and it's at its lowest near the bottom of the cycle when prices tend to be more attainable. At the very least, negative sentiment can drive prices further down, while positive sentiment can urge them back up faster.


4. We allow the doom and gloom to influence us

Try to block out the noise and the doomsayers. The media have quite a knack for using the emotion of fear to grab our attention. Don't let them stop you from nabbing an opportunity to become financially independent with the right real estate investment for you. 


Look out for property investment tips wherever you can and do your research. There are plenty of places where you can purchase a gem that will easily double its price growth within a decade - just stop listening to the negativity of those who wish to set you back.


5. You can't predict the unpredictable!