AUSTRALIA'S HOUSING MARKET RECOVERY IN 2020

After experiencing declining home prices, regulatory pressures from the Financial Services Royal Commission, and concerns over construction quality, Australia’s housing market took a dramatic turn in 2019, setting the stage for a much stronger 2020. The state election, multiple interest rate cuts, and tax incentives fueled a rebound, but the question remains—how will these factors shape the real estate landscape in 2020?

1. Housing Market Recovery is Well Underway

The Australian property market rebounded significantly in late 2019, driven by:

Three consecutive interest rate cuts by the Reserve Bank of Australia (RBA)

Tax cuts and relaxed lending rules

The end of the Royal Commission’s financial scrutiny

Limited supply of new listings

Buyers returned to the market in full force, but sellers remained cautious, creating a supply-demand imbalance that pushed prices higher.

2. Luxury Markets vs. Apartment Challenges

While the overall market showed recovery, performance varied by location and property type.

Sydney’s high-end suburbs saw strong demand, with luxury homes experiencing rapid price growth.

Apartment-heavy areas faced difficulties due to concerns over building defects and cladding issues—particularly affecting units built between 2014 and 2019.

Perth saw a surge in buyer interest, with three times the realestate.com.au search activity compared to the broader metro area.

3. Factors That Will Slow Price Growth

Although home prices were rising, two key factors were expected to moderate the pace of growth:

Increased housing supply – Melbourne’s high-end suburbs saw a rise in new listings, which helped ease price pressure.

New construction permits – A modest increase in building approvals suggested that supply could stabilize the market in the long run.

4. Rising Rents Across Major Cities

Rental prices were expected to increase across most Australian capital cities, driven by:

Lower new housing supply in 2020

A rebound in demand, particularly in Sydney and Melbourne

Ongoing affordability issues for homeownership, pushing more people into rentals

The exception to this trend was Darwin and Sydney, where median rents had declined in 2019. However, Sydney was projected to see a slow recovery in rental growth.

5. First-Home Buyers Expected to Stay Active

Since May 2019, first-time homebuyers had increased their activity on realestate.com.au. The First Home Loan Deposit Scheme (FHLDS), launched in January 2020, was expected to further boost demand by:

Allowing eligible buyers to purchase a home with only a 5% deposit

Removing the need for expensive lenders mortgage insurance (LMI)

Increasing competition for entry-level properties, thereby driving up prices in lower-priced segments

6. The Impact of Bushfires on the Housing Market

The devastating 2019-2020 Australian bushfire season had a significant impact on housing markets in affected areas.

Short-term rental demand surged as displaced residents sought temporary housing.

Property listings increased as some homeowners chose to leave fire-prone regions permanently.

Rebuilding efforts created long-term value, as properties constructed after bushfires tend to be built to higher safety standards, which could boost future desirability.

7. Affordability & Sustainability as Key Priorities

While rising home prices are seen as a positive for investors, affordability remained a growing concern:

Australian cities consistently rank among the least affordable in the world.

Homeownership rates continued to decline, making housing stress a major social issue.

Sustainability was also gaining traction, with more buyers prioritizing:

Energy-efficient housing designs to reduce costs

Energy-efficient housing designs to reduce costs

Climate-resilient properties that could withstand natural disasters

Government policies promoting sustainable development

Final Thoughts

The 2020 Australian property market was poised for a strong recovery, but challenges such as affordability, rental supply, and bushfire rebuilding efforts were expected to shape the year ahead. While the luxury and first-home buyer markets flourished, investors remained cautious amid regulatory uncertainties.