New forecasts expect Sydney property prices will fall in the next two years, while Brisbane and Melbourne will quickly come off the boil. All Australian capital city markets are expected to weaken in the 2017-18 financial year as most tip into oversupply, according to forecasts in BIS Oxford Economics’ Residential Property Prospects 2017 to 2020 report. A stable economy and low interest rates would prevent an American-style crash, the report said, but there would still be price falls in some cities.
In Sydney, median house and apartment prices are expected to fall 4 per cent by 2020. In Brisbane, house prices will increase 7 per cent, while unit prices will fall 7 per cent. In Melbourne, there is predicted to be growth for houses of 5 per cent over the same time period, but apartments prices would fall 4 per cent. I will have something to say about those comments in just a moment, but for the time being – back to the report.
A BIS Oxford Economics spokesperson said one driving factor was the falling away of investor demand over the next 12 months due to a tightening in lending. Strong investor demand had been drivers of both the Sydney and Melbourne markets, and the biggest challenge for the Sydney market would be the retreat of investors from the market.
Investors have consistently accounted for more than half the value of residential loans in NSW since 2013. Investors primarily get into the market, expecting capital growth, and if they’re not seeing price growth anymore, then they’ll start pulling back. If and as they start to retreat, the competition they’ve created starts to dissipate a little and that will impact prices. Less competition, less upward pressure on prices.
On prices – I would like to make this point – median prices are not an indication of rising or falling prices. The median is simply an the mid point in the most dominant price range which is more an indicator of price buying preferences. That is one of the most frustrating issues I have with media reporting around pries, values and market movement.
Meanwhile – more and more households are falling behind on their mortgage repayments as a result of rising home loan interest rates. S&P Global ratings reported April’s arrears at one point two one percent – a slight increase from the one point one six percent figure in March.