According to Mr Oliver, a range of pricing and economic factors caused the downturn:
Firstly, a correction to the huge surge in 2017, where properties where overvalued and mortgagees were left with high debt
The end of the mining booms in 2014 for Perth and Darwin
Tightening lending standards that cracked down on lending to investors and interest-only loans
A surge in supply of units in the major capitals
80 per cent collapse in foreign demand
A big pool of interest-only borrowers switching to principal and interest loans
Price fall feeding on themselves with a fear of not getting out of the market driving down the price
Investors started to fact in the probability of Labor victory, which would restrict capital and capital gain taxes, meaning another 5 to 10 per cent could fall
Recent wins for the property market
While the drags remain significant, several positives have become apparent over the last few weeks. Mr Oliver believes these will help stabilise the market:
First home buyers are now on the way as the government’s First Home Loan Deposit scheme takes effect.
Secondly, APRA is lowering the 7 per cent mortgage buffer making it easier to access capital.
The RBA governor has all but confirmed that rate cuts are on the way.
The threat to changes to negative gearing and CGT is gone with a Morrison government victory.
AMP chief economist Shane Oliver saidthe combination of Labor’s negative gearing plans not coming into effect, a cash rate cut likely for next week, Mr Morrison’s promised financial help for first home buyers and the banking regulator relaxing its 7 per cent interest rate test points to house prices bottoming earlier and higher than previously expected.
Mr Oliver now anticipates capital city average house prices to have a top-to-bottom fall of 12 per cent – 10 per cent of which is already done – rather than 15 per cent.
Further, he expects prices to largely hit their floor at the end of the year.
A return to boom time?
However, given the still poor affordability, high debt levels, tighter lending standards and rising unemployment, a quick return to the boom time is unlikely.
Simply put: the fall has been big, and it will take a while to recover.
View original post 384 more words