First home buyers may be smiling but home owners could be in for another tough year with prices in Sydney and Melbourne tipped to continue to decline in 2019.
Dwelling values are predicted to fall 3.3 percent in Sydney and by as much as 6 percent in Melbourne on the back of declines in inner-city areas, according to Monday’s Fourth Quarter Housing Forecast Report from Corelogic and Moody’s Analystics.
Tighter credit conditions in 2018 saw Sydney’s housing market fall by 5.8 percent, after a 12.8 percent rise in 2017, while Melbourne values dropped 0.1 percent last year.
However, Sydney’s apartment values are set for a modest recovery, following a 2.9 percent decrease in 2018.
“Peaks and troughs in previous cycles have been steeper for houses, which in part reflects the difficulty in unlocking new supply; conversely, apartment supply tends to outstrip house supply in Sydney,” Moody’s Analytics economist Katrina Ell said in a release.
“A high level of supply has now come on line for apartments in the inner city and surrounding areas as well as dwellings in suburban areas via land releases and removal of some development restrictions – this will contribute to the forecast slowdown in 2018 and 2019.”
CoreLogic’s latest Hedonic Home Value Index showed national dwelling values fell 2.3 percent over the December quarter – the worst quarter-on-quarter decline since 2008 – with most regions of Australia recording a weaker performance as national values dropped 4.8 percent in total in 2018.
For the next 12 months, Moody’s predicts house values across Brisbane will gain a mild 1.2 percent in 2019, with strength in west Brisbane and inner Brisbane offsetting declines in south Brisbane.
Despite commodity prices stabilising, house values in Perth will likely decline 2.8 percent in 2019, followed by a recovery in 2020, thanks to population growth.
Adelaide’s housing market will continue its stable run with a 2.6 percent rise in 2019.
Greater Melbourne house values are now 11 months into a correction, with the decline accelerating to a low not seen since the global financial crisis.
House values in Melbourne’s inner east have fallen 12.5 per cent from their peak in July 2017, while house values in the city’s inner south and inner metro area have decreased 11.3 percent and 8.3 percent, respectively.
Last month Reserve Bank Assistant Governor Christopher Kent blamed “unnecessary” credit tightening for further threatening a market that has been on the slide since 2017.
The Organisation for Economic Co-operation and Development also said last month a burst housing bubble remains the greatest risk to the nation’s $1.3 trillion economy.
Despite an economy sailing near its full potential, Moody’s warned fading wealth effects from the entrenched cooling of the housing market will become a greater drag.
“Given that most of household wealth is in the relatively illiquid asset of housing, there would be greater systematic implications if debt repayment difficulties suddenly become a broader concern,” Ms Ell said.
“For example, if unemployment were to rise, it would force many households to sell at once.”