In the middle of last year, several top economists were predicting house prices to in fact increase in 2018 – one forecasting as much as nine per cent, but since then house prices have experienced their largest and longest peak to trough decline in recent history spurred on by increased housing affordability constraints, a banking royal commission with a microscope on lending standards, and APRA’s restrictions on new investor loans.
Now that the price falls are well and truly in motion, all five economists recently surveyed by The Australian Financial Review forecast national house values would continue to drop in 2019, with Sydney, the epicentre of the downturn, dragging down the national average.
Stephen Koukoulas, of Market Economics, was most downbeat about the state of the property market, with expectations prices would fall in Sydney between 7.5 per cent and 10 per cent in 2019 after a drop of 7.5 per cent in 2018.
Nationally, he predicted house prices would fall by between five per cent and 7.5 per cent.
“From the 3rd quarter in 2019, I am forecasting some stability in prices as supply and demand forces underpin new activity,” Mr Koukoulas said.
By then he expected cashed-up first-home buyers would be lining up to take advantage of increased levels of affordability.
A key consideration for Geordan Murray, HIA acting principal economist, is that while population growth is slowing, it remains strong and will ensure ongoing demand for housing throughout the cycle.
“The labour market has been improving and is projected to continue to do so. This should contribute to further modest improvements in wage growth,” Mr Murray said.
“There are risks around borrowing costs.”
A key issue mentioned by the economists was that at some point in 2019 is whether the RBA may be forced to consider another interest rate cut if the slump in home prices starts to impact consumer spending and the outlook for inflation.
While each economist offered a variation on how much prices would fall in 2019, each attributed the tightening of credit, rising mortgage rates, and a surge in new supply to the further softening of the market.
To see each economist’s predictions, read the full article on the Australian Financial Review. Please note you will need to be an AFR subscriber to read the full article.