Property market rebounding faster than expected

The rebound of property price has accelerated at the end of last year based on recent data (refer to tables), demonstrating much faster rebound than originally expected.

The Rebound that started mid last year, is showing prices rising in most capital cities in the second half of 2019. Melbourne and Sydney have had the fastest turnaround, but that recovery has spread to all capital cities. (see chart below)

The three most recent rate cuts by the RBA and the expectation of lower rats for an extended period have caused an increase in property prices. Another contributing factor could be that more people were aiming to buy property in the second half of 2019.

This rapid price rise will also boost the construction sector. Apartment construction is expected to slow further this year, but the rebound in price should activity should be building activity similarly rebounds solidly in the years ahead. Property sales should also increase this year, likely to driving higher consumer spending.

Due to this rapid price increase, a boost to the construction industry is expected. Even though apartment construction is expected to slow down this year, the rebound in price should similarly cause solid rebounds in building activity for years to come. Property sales should also increase this year, likely to energise higher consumer spending.

The challenge for RBA to cut interest rates further is the speed of the price rebound. For RBA financial stability is crucial, thus keeping rates on hold for an extended period may be a highly probable option.

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