New forecasts suggest property price growth is about to slow significantly, which may cool the recent housing bubble speculation.
NAB Group Economics’ predictions of a major slowdown in Sydney and Melbourne come in the same week that LF Economics triggered debate with a claim that Australia is suffering the “largest housing bubble on record”.
NAB forecast that Sydney house prices will increase 10.0 per cent in 2015 and 5.0 per cent in 2016. That compares to a current growth rate of 16.4 per cent, according to the most recent CoreLogic RP Data figures.
Melbourne house prices are forecast to rise 6.2 per cent in 2015 and 3.5 per cent in 2016, compared to a current growth rate of 9.8 per cent.
Brisbane is growing at 3.2 per cent and has been forecast to slow to 3.0 per cent in 2015 before climbing to 5.0 per cent in 2016.
Perth house prices are now growing at 1.0 per cent, but are expected to decline by 2.5 per cent in 2015. Prices are then expected to remain flat in 2016.
Adelaide prices are forecast to grow 0.4 per cent in 2015 and 0.5 per cent in 2016, compared to a present growth rate of 3.5 per cent.
Across Australia, house price growth is expected to be 6.4 per cent in 2015 and 3.8 per cent in 2016.
NAB said the slowdown would be caused by “rising unemployment, sluggish household income growth, affordability concerns – especially in Sydney and Melbourne – cost of living pressures and still-high levels of household debt”.
Australia’s eight capital cities are currently growing at 9.6 per cent, according to CoreLogic RP Data.
[Related: Housing bubble? Yes, no, maybe]