AF­TER THE FALL

Prop­erty pun­dits pre­dict more price slides in 2019 but the num­bers are any­one’s guess, writes Har­vey Gren­nan.

Australian House & Garden - - ADVICE -

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%.

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