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McGrath Estate Agents founder and executive director John McGrath has said that there is “zero chance” that the market is pregnant with a further 40 per cent drop in value, as some “purported” experts are claiming.
In the 2019 McGrath Report, Mr McGrath said that the theory that there would be another 40 per cent drop in values to go was both sensational and erroneous.
“There is zero chance we will see a collapse like this,” the founder said.
“There would have to be a global economic ice age to generate this sort of slump, and then it wouldn’t matter where your cash was tied up; we’d all be in trouble.”
Important
Mr McGrath said that the fundamentals underpinning property values in Australia remain “rock solid”.
“What we are seeing now is an important part of every major asset cycle: a correction in values after a sustained period of growth.
“Remember, it was only Sydney and Melbourne that had significant growth; over 50 per cent, in recent years. The rest of Australia has had pretty subdued price increases post-GFC.”
Mr McGrath said that he’s heard the “40 per cent overvalued” theory four times in his 35 years in property.
“It’s like the same groups are chasing the same headline impact every time the market corrects.
“Not once has this provocative prediction come true, or even close to it. It won’t this time, either.”
Mini rebound
Instead, Mr McGrath expressed that the Sydney and Melbourne prices might correct by another 5 per cent to a maximum of around 10 per cent, with the “strong possibility” of a mini rebound in 2019 as buyer demand grows at adjusted pricing levels.
“It’s impossible to pick the top or bottom until they are behind us, but my instincts tell me the market has corrected quickly and we are within a few percentage points of new price benchmarks.”
He added that only three things could change this, saying: “A spike in interest rates over the next 24 months, which would return us to the long-term average of around 7 per cent; banks tightening lending even further; and unemployment escalating rapidly.”
But none of these are likely to happen, Mr McGrath said.
“I believe the worst of this correction is already over and we’re in for a much softer landing than many pundits predicted.”
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