Forecast for Australian Property Prices from Three Economic Experts

Economic experts cannot agree on the health and outlook for Australia’s property market. USB saying there would be a 35% decline in Australians’ mortgage borrowing power and a likelihood of steep declines in house prices.

On the other hand, AMP expects another 5% decline in 2018 and no decline in house prices. ANZ is forecasting the property market has seen the worst and it is expected to post an increase in prices this year and the next.

In March, capital city house prices decline 0.2%, the fifth straight month of price decline. This brings the annual growth rate to 0.8%, versys 11.4% in May 2017.

UBS forecasts a ‘credit crunch’


The royal commission is ‘more material’ than UBS anticipated, as regulators are expected to make the appropriate lending laws stricter, an action that would make it more difficult to obtain mortgage finance.

In this case, the maximum amount of mortgage loans could drop by 35%, due to increased living costs becoming totally added to the mortgage computations.

USB’s forecast places house prices between flat and -3% year on year in 2018 and 2019, a bigger price drops due to an expected credit tightening scenario.

AMP forecasts more weaknesses moving forward but no crash

AMP doesn’t expect concerns of a house price crash to come to reality due to three things:

  • Housing supply has not been able to meet population-propelled demand
  • The fairly strong debt serviceability
  • It is risky to make sweeping forecasts. Property prices have significantly increased in Sydney and Melbourne but have declined in Perth and Darwin and have only moderately increased in other cities.

For AMP, a crash is not likely, but it projects property prices in Sydney and Melbourne to decline another 5% or more in 2018, with more drops a likelihood in 2019.

ANZ says worst is over

ANZ forecasts no more slowdown in Australia’s capital city house prices from this moment. Contrary to the forecasts by UBS and AMP, priced will increase in 2019 and next year.

In February 2018, both ANZ and NAB recalled their forecast of two RBA rate increases for 2018, a move that is welcome for the property market.

ANZ economists believe that most of the slowdown has passed and prices would not materially drop.