The last half of 2019 is a good indicator for what 2020 will entail in relation to the Sydney housing market. Sydney has seen strong growth in the median house price in the September quarter of 2019. Prices have risen 3.6% in the 3 months to September 30. This is up from 2.6% the year before and the strongest quarterly gain in 3 years. Low interest rates and an easing on lending restrictions has aided the growth. In 2020 another financial instrument could stimulate even more growth.
The government plans to introduce the First Home Loan Deposit Scheme which is aimed at assisting first home buyers to enter the market with only a 5% deposit. Banks usually require a 20% deposit in the current market and if a home-buyer does not have the minimum 20% required they have to pay thousandths for Lenders Mortgage Insurance. The government will guarantee mortgages for the first 10,000 home buyers. This is a good thing for not just investors or home-home-owners but also the home-buyers looking to enter the market.
Other market indicators such as G.DP growth is a little worrying as the Australian economy only grew .4% last quarter and household savings increased to 4.8%. JP Morgan Chief Economist Sally Auld says:
”If we go back maybe 10 or 15 years, GDP per capita [growth] was averaging about 3 per cent, which meant that our living standards were growing at a pretty good clip. If we take the average of the last five or six years, that’s now growing at 1 per cent. What that tells us is that the rate of increase in the economy, when we adjust for population growth, has slowed quite a lot over the last decade or so.”
Will a slowing economy put downward pressure on the house prices in Sydney? Or will the First Home Loan Deposit Scheme inject another wave of growth in the housing market? These two forces seem to be working against each other and 2020 will reveal if the growth can continue.