AFTER THE FALL
Property pundits predict more price slides in 2019 but the numbers are anyone’s guess, writes Harvey Grennan.
Analysts in the business of forecasting property prices have not been arguing about the direction of the market but, rather, how far it will drop and for how long.
It’s no secret that housing values have been falling since the boom of 20122017, which saw Sydney house prices soar by 65%. According to research group CoreLogic, national dwelling values have been sinking for over a year, but there have been winners and losers among the capital cities.
Sydney prices have suffered the biggest slide, with the value of houses and apartments declining 7.4% in the 12 months to the end of October, with Melbourne down 4.7%, according to CoreLogic. Hobart has been the major exception, with prices rising 9.7% from a low base. Poor affordability, tighter credit restrictions, high household debt, fewer Chinese buyers, rising unit supply and interest-rate hikes have taken their toll. Many investors have been hard hit as they are moved from interest-only to principal-and-interest loans.
The report of the royal commission into banking and the Labor Party’s proposal to restrict negative gearing and the capital-gains discount if elected may further negatively impact house prices. Doomsayers predict a 40% crash in housing values. However, most experts have a more sober outlook, citing the healthy economy, strong immigration, low unemployment and still historically low interest rates.
Ratings agency Standard & Poor’s sees a ‘soft landing’ ahead. SQM Research’s Louis Christopher says it’s “the correction we had to have” in Sydney and Melbourne. Among the more pessimistic is AMP Capital’s Shane Oliver, who forecasts a 20% fall from the 2017 peak in Sydney and Melbourne, and a fall of nearly 10% nationally. The risk of a crash can’t be ignored but is unlikely, he says. Oliver believes Perth and Darwin are close to the bottom and that prices are likely to perform better in Adelaide, Brisbane, Canberra, Hobart and regional centres.
Moody’s Analytics offers a more positive view for 2019 and an even better one for 2020. Its econometric model forecasts a tiny rise of 0.6% in house values for Sydney in 2019 (1.8% for units), but there will be variations across sub-regions. Values in Melbourne are expected to fall just 0.2% (+1.7%). Perth is another mixed bag, with overall house values set to fall 0.5% (-0.9%).
In Brisbane it’s all good news, with values to rise 2.7% (6.2%) on average. Adelaide should do even better, with values forecast to rise 3.8% (2.3%). In Hobart, the 2018 boom comes to an end with a fall of 0.3% (+3.8%) while Canberra sees a predicted gain of 4.1% (9.8%). Darwin has the best prospects for houses in 2019, says Moody’s, with a price lift of 7.1%, though units will drop 4.7%.