What is the Property Price Forecast for the Next One or Two Years?

This is what is in the minds of people now that Australia’s property market appears to be bottoming out.

Not so long ago the media was forecasting a housing market collapse but the property cynics were way off the mark and as green shoots are emerging it appears the property cycle is reaching the bottom.

Nonetheless, this has been the most protracted and the worst decline in modern history.

Though the aggregate capital city market prices dropped by just over 10% from their highest level, property prices in Sydney have declined by 14.9% and in Melbourne by 11.1% from the peaks since 2017.

The ailing Perth and Darwin real estate markets have further declined significantly from their peaks following the mining boom.

Change in dwelling values

  Past 12 months Past 5 years Since Peak
Sydney -9.9% 18.8% -14.9%
Melbourne -9.2% 23.7% -10.9%
Brisbane -2.6% 7.1% -2.9%
Adelaide -0.3% 10.9% -1.0%
Perth -9.1% -19.8% -19.8%
Hobart 2.9% 34.4% -1.1%
Darwin -9.3% -29.4% -30.1%
Canberra 1.4% 22.7% -1.1%
       
Regional NSW -4.9% 22.7% -5.2%
Regional Vic -0.3% 21.1% -1.7%
Regional Qld -1.9% 4.4% -5.5%
Regional SA 0.2% -0.1% -2.9%
Regional WA -10.3% -27.7% -33.5%
Regional Tas 5.6% 23.3% -0.2%
Regional NT 0.6% -6.2% -7.9%
       
Combined Capitals -8.0% 13.5% -10.2%
Combined regionals -3.1% 11.1% -3.4%
Australia -6.9% 13.0% -8.4%

Source: CoreLogic July 2019

What is the forecast?

Property values are expected to stabilise in the capital cities by the end of 2019 and will then show modest growth in 2020, according to economist Trent Wilshire in Domain’s mid-year property report.

House price forecasts

  2019 (six-month change) 2020 (annual change)
Australia (combined capital cities) 1% 2% to 4%
Sydney 2% 3% to 5%
Melbourne 1% 1% to 3%
Brisbane 1% 3% to 5%
Perth 0% 0% to 2%
Adelaide 1% 1% to 3%
Hobart 0% 2% to 4%
Canberra 2% 4% to 6%

Source: Domain

Unite price forecasts

  2019 (six-month change) 2020 (annual change)
Australia (combined capital cities) 1% 1% to 3%
Sydney 2% 2% to 4%
Melbourne 1% 0% to 2%
Brisbane 0% 0% to 2%
Perth 0% 0% to 2%
Adelaide 2% 1% to 3%
Hobart 2% 3% to 5%
Canberra 1% 1% to 3%

Source: Domain

A Metropole research shows that prices are expected to decline more in the coming months, but the rate of decline in house prices is slowing.

Interest rates are declining, consumer confidence is improving, there is faith in the country’s government and taxation system, and lending institutions are beginning to relax its requirements and approve more loans.

The result is that more people are filing applications for home loans, more people are going to home inspections and sellers who have waiting for the market to turn our gaining confidence as auction clearance rates are increasing (though on low figures).

Analysts are monitoring for days on market to decline and sellers discounting to decline, along with more homes for sale before they declare a market boom,

Though the economy is declining, solid population growth (Treasury is predicting 1.75%) during a time when the recent construction boom is weakening and building approvals for new construction declined 20% from 2018 shows that the present glut in housing will soon be absorbed in the market cycle will pass.

Sydney Property Market Forecast

Following the biggest correction in home values in the past 30 years, the decline in Sydney prices are expected to end by late 2019, with values at roughly 2% higher by end-2019 and values continuing to increase in 2020.

The drop in Days on Market and Vendor Discounting and increase in auction clearance rates are all positive indicators for Sydney’s real estate market.

So is the increase in first home buyers interest, with 25% of home loans in NSW in March approved for first-time buyers,

But some sectors of the city’s property market are expected to weaken significantly more than that average in 2019 (specifically the off the plan properties and new apartments), while some sectors of the market will weather it out.

Investors are staying away from the off the plan apartment segment and countless of those who bought off the plan a few years back are presently having difficulty reconciling valuations coming in on completion at well under contract price during a time when lenders are more hesitant to approve loans for these properties.

In the backdrop, however, solid economic growth and jobs creation is driving population growth and current demand for Sydney property.

Simultaneously, overseas interest from tourists and migrants remains.

In Sydney, investors are being offered a chance to purchase established apartments in the eastern suburbs, lower north shore and inner west in a “buyer’s market” with slight further drawback and the expectation of the market recovering in late 2019 and 2020.

It is an ideal countercyclical period to consider purchasing an investment grade property in Sydney.

Melbourne Property Market Forecast

House values have dropped 11% and the prices of the Melbourne Apartments has declined 8% since their peaks. However, house and unit values are predicted to rise by 1% between June and December 2019, and in 2020, house values will increase by 1 to 3% and unit values by 0 to 2%.

However, Melbourne’s property market is highly divided, with values in some segments already recovering significantly.

The resilience throughout the apartment segment, notwithstanding increased supply levels, is likely the result of a combination of affordability limits in the market plus increased number of home buyers buoying housing demand throughout the lower price ranges of the market, due to the First Home Owner incentives.

The Melbourne property market is getting back its confidence and the principal basic growth drivers are still solid. An example is auction clearance rates, which are increasing but in much smaller quantities.

General property prices will be supported by a strong economy, jobs growth, the most robust population growth in the country, and the arrival of 35% of all foreign migrants.

Take note that Melbourne ranks as one of the 10 fastest-growing major cities in the developed countries, with its population expected to grow by roughly 10% through 2023.

Brisbane Property Market Forecast

Brisbane’s house and unit prices are forecast to bottom out through December 2019 and house prices to start increasing, while apartment prices will continue to be flat for a while.

But house prices are predicted to increase by 3 to 5% in 2020.

With migration numbers increasing, supply under control and overall strong rates of housing affordability, Brisbane’s housing market basics are proving to be stronger than most other capital cities.

Simultaneously, the underlying robust demand from investors and home buyers from the southern States at a period when returns are appealing and housing affordability is fairly strong and putting a floor beneath property values.

Brisbane economy is being buoyed by big projects like Queen’s Wharf, HS Wharf, TradeCoast, Cross River Rail, the second airport runway and the Adani Coal Mine. However, jobs increase from these projects will not commence for a few more years.

There has been a major improvement in local consumer confidence as more homebuyers and investors show interest in a property.

Canberra Property Market Forecast

House prices in Canberra are forecast to increase by 2% and unit prices by 1% through the rest of 2019 and in 2020, house prices are expected to increase by 4 to 6% and unit prices to rise modestly by 1 to 3%.

This will make Canberra the country’s most robust housing market in 2020, buoyed by high population growth and low unemployment.

But the existing high number of new apartment buildings (unit, apartment and townhouse approvals during the past year are 30% higher than in 2018) will hinder unit values from increasing.

Perth Property Market Forecast

Property prices in Perth have been declining since mid-2014, but are forecast to bottom out over the rest of 2019, and home and apartment values are expected to gradually rise in 2020.

But market sentiment will take a long time to recover in the Western Australian capital.

The increasing population growth, which is expected at 1.5% in 2020, up from 0.9% in 2018, is one of the encouraging factors for Perth.

Hobart Property Market Forecast

Hobart’s property market has been one of the best performers in the past three years, but prices are flat so far in 2019.

In 2020, house prices are forecast to grow by 2 to 4% and units by 3 to 5%.

Adelaide Property Market Forecast

The current modest property price growth in Adelaide is expected to continue for the rest of 2019, with house values forecast to rise by 1% and unit values by 2%.

In 2020, property prices are forecast to increase by 1 to 3%.

House prices have increased steadily by roughly 3% in recent years (units have increased by roughly 2% per year), though prices have become stable in 2019.

What to do to stay ahead in the present market!
With indicators pointing to an excellent countercyclical buying prospects at present, you will need independent expert advice and thorough consideration in navigating the different market conditions in Australia and more importantly here at home in Newcastle.

An independent expert like Annette Pinkerton of One Agency Pinkerton Properties, will help you formulate a strategy or conduct a review of your circumstances and help you achieve your property goals.