In June of this year, ANZ made an assessment that Melbourne house values could fall as much as $1000 a week for 18 months to follow.
Many property experts immediately dismissed the claims as over the top and dramatic.
This shouldn’t surprise you. After all it’s not in the interests of the mainstream media, with its property lift-outs in newspapers and renovation shows on TV, to keep you ahead of the game. They’d much rather you stay in your own little bubble, blissfully unaware.
Yet the latest report from BIS Oxford Economics analysts say property price movements will remain weak, and decline in some markets in the short-term. And now, there’s no shortage of experts trying to ‘predict’ the Australian market and jumping on the housing-bust-train…months after it left the station.
Meanwhile, the property market downturn is being exacerbated by a tightening in lending criteria, as well a clampdown on interest-only loans, and a boom in construction.
Australia’s housing market became unbalanced during the long real estate boom, with Melbourne and Sydney far outstripping other cities. Our other state capitals have also seen healthy pullbacks in recent years, while Sydney and Melbourne continued upwards until more recently. This could mean house prices in areas such as Brisbane, Perth and Canberra are awaiting increases, as Sydney and Melbourne prices slowdown.
So, according to the BIS Oxford Economics report, here’s what’s predicted by 2021 in some of Australia’s biggest cities:
- In Sydney prices are set to come to a crawl
- Melbourne prices are thought to rise by 6% from strong population growth, which is causing housing demands
- Brisbane is tipped to have the largest median price increases of 13%
BIS warned that that home buyers shouldn’t get too excited as the likelihood of losses will be balanced by record low interest rates (as the RBA has once again held interest rates at 1.5%), as well as ‘…relatively stable, albeit subdued, economic environment’.
Is there an upside to property market forecasts?
Australian consumers have appeared quite resilient despite slipping house prices. While investors are hesitating over the property market, owner-occupiers may go some way to propping it up. As BIS Senior Manager Angie Zigomanis said: ‘Soaring population growth in Victoria is expected to be a key to house prices in Melbourne as investor demand continues to weaken, by supporting owner occupier demand’.
However, population growth may not be enough to save the market. Since that report was published three months ago, Australian housing prices have declined by 2%.
CoreLogic’s head of research, Tim Lawless, also blamed Australia’s credit market when speaking to the ABC about the factors contributing to the downturn:
‘Foremost of which is the tighter credit environment which has slowed market activity, especially amongst investors…
‘Fewer active buyers has led to higher inventory levels and reduced competition in the market.
‘Collectively, these factors have been compounded by affordability challenges, reduced foreign investment and a rise in housing supply.’
Mr Lawless suggested sellers are now spending more time in the market. Add this to the record highs in household debt and recent price falls, and it paints a picture of very precarious housing market conditions.
This was backed up by CoreLogic’s head of Australian research, Cameron Kusher. He also believes that sellers need to change their expectations.
‘For sellers, they really need to be very realistic about the market … and set appropriate prices for the market, which means not prices that they would’ve set 12- 18 months ago.’
Many sellers are under the impression Australia is still at the height of the housing bubble, but as 2018 has already seen, markets may in fact be weakening.
For Markets and Money
PS: Learn about the 18 Year Real Estate Cycle and why 2018 could be the best time to buy property and take advantage of this fast climbing market. Find out more in Phil Anderson’s free report ‘Why Australian Property Is On The Verge Of A Decade Long Boom’.