What Can Home Buyers, Sellers and Investors Expect in 2019?

The property market without a doubt experienced ups and downs in 2018.

At the start of the year, home prices were sky high, mortgages rates reached record lows, and sellers gained the upper hand. In the past months, however, the growth of home values has wavered, rates have increased to its highest levels in almost eight years, and favour has began to move from seller to buyer.

Will we see the same trends this year? Will it be a wild rise still for housing in the new year? Here is what the experts predict for the real estate market in 2019:

What Can Home Buyers, Sellers and Investors Expect in 2019?
Even though it has steadily increased for the last two years, mortgage rate continue to be lower than they were during a significant period of the recession and below average for the kind of robust economic development Australia has been enjoying. 2019 will be different. Fixed rate mortgage gets to 5.8% – a level not seen since the 2018 financial crunch when rates were plunging due to the housing crisis.

Rising rates will not deter millennials
Mortgage rates will continue to rise and demand will surge in 2019. Increasing rates, by tagging a hefty price tag on homes, will probably discourage some people from buying. Conversely, the biggest cohort of millennials will reach the age of 29 next year, coming in to peak household formation and home-buying age, and sharing in the growth of first-time buyer demand.

Millennials will remain the biggest sector of buyers next year, making up 45% of mortgages, versus 17% of baby boomers, and 37% of Gen Xers. It will not be easy for first-time home buyers next year, but older millennial move-up buyers will have a broader selection in the mid-to upper-level price point and will represent the majority of millennials who close in 2019. In the years ahead, 2020 is forecast to be the peak millennial home buying year with the biggest cohort of millennials reaching age 30 years. Millennials are expected to comprise the biggest share of home buyers for the next 10 years as their housing requirements change over time.

Home buying power to decline – likely good news.
Majority of home buyers set aside a monthly payment. When rates increase, a fixed monthly payments means less borrowing capacity and purchasing power has dropped around 10% since the same time in 2018. Because the number of buyers drops at every price point, the right market reaction is a decline in sales and a slowdown in price momentum.

Broader home sales to decline
Home sales are forecast to drop about 2% in 2019. It is going to be another slightly slower year as buyers continue to fight higher mortgage rates after struggling with many years of brisk price increase.

Inventory issues will lessen but not too much
The flood of first-time home buyer demand will see a rather higher supply levels than in 2018. But inventory is expected to remain stretched nationally during 2019, despite the days of multiple offers and bidding wars being a thing of the past in certain markets where stock is growing.

The stock increases or decreasing price required to achieve a more extensive sales growth are not likely to happen in 2019. The circumstances are not getting better for buyers, but it is also not getting better significantly in most markets.

Home value growth to continue to slow
Home price growth is expected to slow to almost 3% in 2019. This is based on the belief that the recent pattern of rising stock levels will continue in the coming year.

Less competition among buyers, but first-time buyers may not benefit
Buyers who managed to remain in the market will experience less competition as more buyers opt out due to affordability issues. But they have this heightened feeling of urgency to finalise their purchase before prices increase even more. Their biggest hurdle in 2019 will be bringing together wants, needs and budget against the strong competition of 2018. Though the number of houses on the market is rising, which is a plus for buyers, most of the new stock is aimed at the mid- to higher-end price level, not entry-level.

Competition between individual and institutional investors
Moneyed institutional buyers have enormous ad budgets and their spend doesn’t allow ordinary real estate investors to compete. A large sum of money is needed to undertake a marketing campaign that aims at exact targets and spots acquisition opportunities. Institutional investors gain instant advantage for that alone. In addition, interest rates are rising, which not only affects buyers without the funds to move, but also individual investors aiming to take out a loan and keep rental properties. Their expense to borrow goes up while stock levels drops and competition strengthens. Individual investors do not want to see this kind of combination middle-market.

Bottom line
In general, housing is expected to slow down in 2019, but analysts don’t exactly see that as bad news.

They see bullish medium and long-term prospects for housing, thanks to demographics continuing to boost demand. A slow price growth will give income the break to catch up. Slower sales could normalise inventory. The housing market is expected to be stronger going forward with the slowdown in 2019.