House prices are expected to fall sharply in Sydney and Melbourne over the course of the year, according to a new report.
Sydney will be hit hardest with values forecast to fall a further 9.3 per cent this year. Apartment values are tipped to decline slower than houses, with an expected drop of 5.9 per cent in 2019, followed by a turnaround in 2020.
The latest report comes after the Australia Bureau of Statistics released figures last month showing house prices had dropped at a faster rate than during the global financial crisis.
Property values have now fallen 13.9 per cent in Sydney since their peak in July 2017 and experts warn prices could remain stuck in a “deep trough”.
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In Melbourne, apartment prices are expected to decrease 5 per cent this year and another 1.4 per cent in 2020.
Across the nation overall, Moody’s expects house prices in major cities to fall 7.7 per cent this year, while apartments will see a smaller 4.3 per cent decline, according to the ratings agency report.
The biggest fall in house prices are expected to remain in the Ryde area, in Sydney's northwest, with a 15.8 per cent fall tipped for this year.
Apartment buyers in Ryde are already paying the sames prices they were five years ago as sellers continue to slash their asking prices to counter the current market slump.
The median unit prices have fallen from over A$720,000 two years ago to about the A$650,000-A$670,000 mark in North Ryde and nearby Meadowbank.
The news isn’t great for Perth either, with house values tipped to decline 7.6 per cent in 2019.
The property downturn could be made worse by changes to negative gearing and further tightening in lending restrictions.
There’s better news in Brisbane, with the worst “likely over” for the Queensland capital, according to the report. House values are set to see a correction in 2019 and strength in East Brisbane.
Values in Brisbane’s apartment market are tipped to recover 0.9 per cent this year.
Adelaide’s housing market will remain stable, with house values forecast to rise 1 per cent in 2019 following a 1.9 per cent gain in 2018.
In Darwin, a further 13.1 per cent slump is tipped for 2019.
Hobart is tipped to end next year with small decreases in house prices over 2020 and 2021.
Labor’s plan to abolish negative gearing on existing properties for new investors could put a halt to a near-term rebound in the market.
“If this policy were implemented within the first year of the Opposition entering office, already-slowing conditions in the investor segment of the market would be exacerbated,” the analysts wrote.
“As investor participation had already slowed, national home values would be expected to reach a slightly deeper trough and have a slower recovery, particularly in the markets where investor participation is higher than the national average, including Sydney, Melbourne and Brisbane.”
Moody’s expects the Reserve Bank to keep the official cash rate on hold at 1.5 per cent until the middle of 2021.
Property prices are still around 20 per cent higher than they were at the start of the property boom in 2013.
The ABS released figures last month showing house prices in capital cities fell 2.4 per cent in the December quarter to record a total drop of 5.1 per cent in 2018.
This compares with the annual fall of 4.6 per cent in 2009 during the GFC.
Sydney prices lost 3.7 per cent to the three months to December for the sixth consecutive quarter loss and were down 7.8 per cent for the year, according to the ABS.
Melbourne prices were down 2.4 per cent for the quarter and 6.4 per cent for the year.
The bureau’s chief economist Bruce Hockman said the falls in the nation’s two major property markets were based on a number of factors.
“While property prices are falling in most capital cities, a tightening in credit supply and reduced demand from investors and owner-occupiers have had a more pronounced effect on the larger property markets of Sydney and Melbourne,” he said.
- news.com.au
