Property resurgence

PHOTO: The property market has seen a resurgence in prices and transactions over the past year, Monetary Authority of Singapore managing director Ravi Menon noted yesterday. The Straits Times/ANN

In Jul 2017, Australia’s booming property market experienced its steepest drop in decades, a fall fuelled by tighter lending standards.

Up to then, values in Sydney had climbed 75 per cent in just five years.

But the move by the financial services regulator resulted in a dip in prices in the most expensive property markets – Sydney and Melbourne. By April this year, the two cities had recorded a 14 per cent and 10 per cent fall respectively from their peaks.

Now, just as suddenly, the market is surging again, marking one of the sharpest recoveries on record. In the past three months, prices increased by five per cent in Sydney and 5.5 per cent in Melbourne.

The average property price in Australia – at a low point in June – has since increased by about three per cent.

But this renewed surge is leaving Australians with mounting levels of debt and prompting questions about whether the pouring of borrowings into property are beneficial to productivity and growth.

The turnaround appeared to begin with the ruling Coalition’s surprise federal election victory in May. The opposition Labour Party, which had planned to remove tax breaks for property investors, had been widely tipped to win.

Prime Minister Scott Morrison’s victory seemed to improve sentiment among home buyers, leading to renewed interest in the market.