It might seem like Australia’s residential market downturn is never ending. And while we appear to be nearing the bottom of the market, experts don’t want you to get your hopes up.
According to BIS Oxford Economics meaningful recovery for Australia’s residential property market remains a while off.
While there are signs of improvement, continued tightness in lending policy and an elevated level of new dwelling supply will remain a drag on price growth for now.
Report author, Angie Zigomanis from BIS Oxford Economics, says the greatest upside to house prices is expected to emerge in Brisbane, with moderate rises in Canberra and Adelaide.
A weak Queensland economy has dampened price growth in the capital in recent years, meaning housing has been relatively affordable. The growth in house prices in Brisbane will be concentrated to the latter part of 2022.
The median house prices in both the Sydney and Melbourne markets are expected to still be below their respective peaks of June 2017 and December 2017 by June 2022.
In the last two years the median house price in Sydney has dropped by 18 per cent. BIS expects this to stabilise through 2019/20 and rise by six per cent in the three years to June 2022.
“With investor demand being more negatively impacted by tightened credit, and supply concentrated in the unit sector, the median unit price is forecast to rise by only one per cent in this time,” says Zigomanis.
“However, with supply falling away sharply from 2020/21, the market is expected to tighten quickly and see price growth accelerate beyond the forecast period.”
Similarly in Melbourne house prices have followed suit, with an estimated 15 per cent drop over the last two years. Like Sydney, these prices are expected to remain flat over the next year.
However, as dwelling completions fall away rapidly from 2020/21 price growth is expected to return.
“Nevertheless, a more constrained lending environment, particularly towards investors, is expected to contain total growth in the median house price to seven per cent in the three years to June 2022,” says Zigomanis.
Unlike its eastern cousins, Adelaide has more or less avoided the fluctuation of house prices. Nonetheless the south Australian capital has also seen modest house price growth.
Affordability remains attractive and should improve as interest rates decline in 2019/20.
Perth’s downturn has been relatively dramatic, with the Western Australian capital experiencing a 27 per cent housing price drop since its 2007 peak.
“While affordability has improved significantly, price growth is being inhibited by a weak state economy, excess dwelling stock and weak population growth,” says Zigomanis.
“With conditions unlikely to improve in the immediate term, notable price rises are not expected to return until 2021/22 as the economy shows stronger signs and excess stock is absorbed. Total median house price growth of seven per cent is forecast in the three years to June 2022 with a corresponding rise of eight per cent for median unit prices.”
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