With the recent developments in the housing market, property analysts are predicting a turnaround in property prices, particularly in two of the most downturn-stricken markets — Sydney and Melbourne.

The key drivers for the housing market recovery are the unexpected victory of the Coalition in the election. This dispelled any concerns about negative gearing and changes to capital gains taxes.

“Before the election, it was obvious that buyers were watching from the sidelines. “We had forecasted a return of confidence if the Coalition wins the election. So this week’s combination has helped forecasts,” Louis Christopher of SQM Research told ABC News.

The property prices in Sydney have fallen 14.5% from 2017 to their lowest level since 2017. According to market watchers, the slump in New South Wales’ capital is due to Labor’s proposal for negative gearing.

The Reserve Bank of Australia’s recent indication of an Interest-rate Cut and the Australian Prudential Regulation Authority’s go-signal for banks loosening lending rules will also boost confidence in property buyers. This will assist the market to recover.

Christopher stated that “the expectation is that prices rise to the upside by end of the year and that Sydney will experience a bottom soon.” Christopher acknowledged that Sydney may see an unexpected boom but there are many unknowns.

Also, read: What the Coalition win means for the housing market

Brendan Coates is a Grattan Institute Fellow who stated that APRA’s changes to lending rules would provide relief in Sydney and Melbourne. He said that these markets’ borrowers have experienced the worst serviceability rules, which has caused a drop in housing demand. 

He stated that “expectations are a significant driving force of prices” and that prices have been falling for some time. He predicted that people would be cautious to return to the market before it ends.

Is it possible to get out of this recession quickly?

Some analysts believe that it is too soon for Sydney to experience a price drop. Paul Bloxham (HSBC’s chief economist) told The Guardian there had been some early signs that the market was improving before the election. He said there had been slowing price drops and increased auction clearance rates. Also, consumer sentiment has improved.

He believes the housing market will stabilize in the second half of the year. Melbourne will likely see a faster recovery than Sydney.

He stated that Sydney has more supply than Sydney’s apartment market. It could take longer.

CoreLogic’s head of research Cameron Kusher does not also expect a quick recovery — he believed Sydney and Melbourne would be able to bottom out next year after hitting overall declines of about 20%.

“But now, if these changes do go ahead, we might actually find the market bottoms earlier – maybe towards the end of this year – and potentially next year we’ll get some slight growth,” he said, “I certainly don’t think it’s a big enough change to lead to rapid acceleration in prices, but I certainly think it will bring some stability.”

Also, read: Competition will heat up as more lenders follow the rate-cut tide.

Andrew Wilson, My Housing Market’s chief economist, said it was better to wait to see what happens over the next few months, even though the housing markets is starting to “see green shoots”.

Auction clearance prices were on the rise and pricing models indicated a slowing of price declines. He said that we have a low base and the market has a low property sales rate.

Wilson stated that Sydney is currently suffering from an apartment glut and that people would need to take time to see how they can catch up.  

“And the cutting of rates is always a double-edged edged sword — it’s a positive for housing affordability but signals a growing concern over the state of the economy,” he said.