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There are ‘dark clouds’ still hanging over the Australian property market

Dark clouds loom over the Australian property market, said realestate.com.au chief economist Nerida Conisbee. (Photo: Getty)

Tax relief for 10 million Australians, and two interest rate cuts – Australia’s pulling out all the stops to get the sputtering economy, and the languishing property market, revving again.

And it’s worked, according to realestate.com.au’s June 2019 property outlook report.

Search activity on the site saw an increase almost as soon as interest rate cuts were announced, and interest in the hardest-hit markets of Sydney and Melbourne are back up.

CoreLogic figures from June show Melbourne home values increased 0.2 per cent, the first increase since November 2017, while Sydney property prices rose by 0.1 per cent, the first rise since July 2017.

“We are yet to see any real uplift in the number of people listing properties for sale and pricing data is yet to reflect a change in conditions, but it is likely that the bottom is very close,” said realestate.com.au’s chief economist Nerida Conisbee.

But it’s not all smooth sailing, she warned.

“While much of this sounds like conditions are once again moving into positive territory, there are some very dark clouds looming on the horizon.

“Although buyers love an interest rate cut... the Australian economy isn’t looking particularly healthy.”

Rising unemployment is a growing threat

Though economic indicators have been poor for a time, low unemployment has been the “bright spark” in a gloomy economy, said Conisbee, but this is no longer the case.

The unemployment rate is currently at 5.2 per cent, its highest level since August 2018.

“With this creeping up and the Reserve Bank pushing through two interest rate cuts very quickly, the positive effect of cheaper finance may not be enough to offset the fact that people are beginning to lose their jobs.”

“If a lot more people lose their jobs, then things could get very bad and it will be far harder to turn things around.”

The worst for property could still be yet to come, the economist said.

According to Conisbee, we’re staring down the barrel of a very different property market: investor lending is down 45 per cent since its peak, buyer activity from the Asian market has dropped “dramatically”, and confidence in the apartment sector has been shattered by the news of poorly made high-rise residential buildings.

Is it all bad news?

There’s a silver lining to everything; there are a handful of things that are looking markedly positive, including several mining towns returning to growth after five years of negative conditions.

In particular, Queensland is leading the way with Brisbane the first city to experience price growth, with Mackay now the top regional growth area in the nation, said Conisbee.

Launceston is now taking over Hobart for price growth, with regional Victoria also performing strongly with suburbs in Ballarat, Bendigo and Geelong now experiencing “never-before-seen property demand”.

Not only this, but international buyers have their eyes on Australia, with global political instability driving search activity from the UK, Hong Kong and the US.

“It is unlikely that these markets will provide the same level of demand for new apartments as we saw from China but there is the potential for this interest to convert to transactions,” she added.

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