Melbourne and Sydney property markets closer to the bottom after shock Coalition victory

The housing market was a big issue during the election so now it’s over, everyone wants to know what happens next to prices.

The property markets in Australia’s two major cities will benefit from clear air now the federal election and banking royal commission are done and dusted, an expert says.

The uncertainty hanging over house prices due to the Labor Party’s plans to change negative gearing and capital gains tax was muted by Scott Morrison’s surprise victory on Saturday night.

Bill Shorten’s property policy would have caused house prices to slide further, says realestate.com.au chief economist Nerida Conisbee, and the Coalition re-forming government means the Melbourne and Sydney markets are closer to bottoming out.

A looming interest rate cut and banks loosening the grip on lending restrictions are also positive signs for the sector.

“Back to business,” Ms Conisbee told news.com.au.

“It won’t get back to where it was in terms of 10 per cent-plus growth because if you look at how the landscape has changed, we’ve seen a significant pull back of investor activity.

“But it’s certainly a more positive environment than it was at the start of the year.”

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House prices in Sydney and Melbourne fell 0.7 per cent and 0.6 per cent in April, CoreLogic figures released earlier this month show, bringing their annual declines to 10.9 per cent and 10 per cent respectively.

The NSW and Victorian capitals are now 14.5 per cent per cent and 10.9 per cent down from their respective peaks in July and November 2017, extending their falls further into uncharted territory.

Most property speculators say the market will continue to weaken until the end of the year, but Ms Conisbee believes the recovery will begin much sooner.

“I can’t see anything that is looking more negative as we head into the second half of the year,” she said. “There’s nothing really negative on the horizon now.

“The thing that will really push it will be if we see an interest-rate cut, and I think that will stimulate the market and get things moving.”

CoreLogic head of research Cameron Kusher told news.com.au he was less optimistic the market had reached the bottom of the trough.

“What the election result does is give people a sense of stability, so there hasn’t been a change of government and some of the changes, particularly around negative gearing that people were worried about, are not going to happen now,” he said.

“That probably gives the market a little more confidence.”

Because Labor had been widely expected to win the election, Mr Kusher says the projected decline in the market may have factored in the changes to negative gearing and capital gains tax.

“But in terms of a recovery, there’s still some challenges for the housing market,” he said.

“Sydney and Melbourne have become very unaffordable, interest rates are low, but it’s still a lot harder to get a mortgage than it has been over recent years.

“Maybe the rate of decline will slow a little bit, but I don’t see this yet as a turning point for the market that bottoming out is necessarily imminent.”

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Originally published as Melbourne and Sydney property markets closer to the bottom after shock Coalition victory