How the Recent Policy Changes Affect the Property Market in 2020

Compared to January 2019, the sales volume in January this year is much stronger. Overall, it’s positive: we have more property enquiries than ever before! Let’s look at the factors involved and how they will impact the property market in 2020.

Since the federal election in May 2019, APRA has relaxed credit lending restrictions. All the banks have reset the serviceability buffers to help borrowers access stronger borrowing power. Instead of applying a 7% buffer to serviceability calculations, many banks now apply the rule of 2.5% above the current rate.

On the other hand, the Reserve Bank has cut the interest rate from 1.5% last year to 0.75%. The expectation is that further cuts will take place sometime this year.

  • The credit reporting system will be improved to provide a comprehensive analysis for assessing credit score. In the past, the system only recorded adverse information, such as bill payment defaults. The new system will provide a deep analysis based on borrowers’ financial situation –– rather than purely focusing on negative data. The allowance for a wider scope of information will help increase borrowers’ credit score.
  • The First Home Loan Deposit Scheme was implemented in January of this year, creating a stimulus in the property market. Under the scheme, eligible first home buyers can pay as low as a 5% deposit and borrow 95% of the property valuation price (without needing to pay any loan mortgage insurance).

Property analysts at BIS Oxford Economics speculate Brisbane property will experience the greatest national capital gains. They expect an average 20% increase in value for houses by 2022 and a 14% increase for apartments. The economic forecaster also estimates an increase in median house price from $552,000 to 665,000. This is the highest predicted for all the major capital cities in Australia.

Core Logic reports that the Brisbane property market bottomed out in June 2019. Yet, property price has increased by 2.2% with little capital gains difference –– 0.1% between houses and units since June last year. The property-information group’s Home Value Index Forecast Q3 2019 Report shows that Brisbane’s apartment market will outperform the rest of the nation in 2020. This is due to the limited supply (and therefore the inflated demand) for housing.

The improving credit score system, the falling interest rates, the new first home loan deposit scheme; plus, improving affordability, stronger rental return and more job demands (associated with infrastructure spend) have pushed the Brisbane property market into a rising deficiency. We have seen more and more interstate and overseas investors moving into the Brisbane property market.

Brisbane Infrastructure Boost Heats up the Property Market

The Palaszczuk Government’s upcoming Budget will deliver a massive $45 billion of infrastructure over the next few years. The investment is a stimulus catalyst for the Brisbane economy. It has the capacity to generate up to 38,000 more Queensland-based jobs per year. This massive injection of funds is set to make Brisbane more livable than ever –– especially in the areas of transportation, medical facilities and entertainment.

Brisbane’s Queens Wharf will be built into a world-class integrated resort. This project will bring 5 luxury hotels, 50 world-class bars and restaurants, theatres, and conference halls –– in addition to an abundance of retail and entertainment space. This is all expected to generate around $1.7 billion of tourist dollars per year (attracting 1.39 million tourists). The new casino will be the biggest casino in the Southern Hemisphere.

It is expected that Brisbane Airport’s 2nd Runway will be completed by the end of 2020. It will operate 24/7, and enable Brisbane Airport to have the same carrying capacity as Hong Kong Airport and Singapore Airport. Passenger numbers are expected to grow from 23 million to around 50 million by 2035.

Cross River Bus and Train will become the most advanced public transportation system in the world. It will have the upper level of a two-lane bus lane, and the lower level of two-way railway line. Project completion is scheduled for 2024. It will significantly improve the existing transportation network.

Brisbane Metro will have two routes constructed for improving the city’s transportation network. Metro 1 connects Eight Mile Plains to Roma Street. Metro 2 connects RBWH to UQ Lakes.

It is foreseeable that the planned Infrastructure spend in Brisbane of around $144.2 billion (over the next 20 years) will create thousands of jobs. Greater numbers of people will move to Brisbane for the job opportunities. Hence, the demand for accommodation will increase dramatically. As a result, this will benefit the Brisbane property market and investors exponentially.