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Australia’s housing market will likely record further dwelling price falls, driven by a deepening housing downturn in Sydney and Melbourne, new research is predicting.
SQM Research’s base case forecast is for dwelling prices to fall between 6 per cent and 3 per cent, a continuation of the current falls of 4.5 per cent over the past 12 months.
It finds that Sydney and Melbourne will drive the falls. Other cities will record mixed results, with Hobart expected to have a third year of strong price rises of 5 per cent to 9 per cent.
The forecasts make certain assumptions: no changes in interest rates, a Labor win with negative gearing repeal and CGT changes coming into effect on 1 July 2020.
If the assumptions are correct on the Sydney and Melbourne forecasts, it will mean that by the end of 2019, the peak-to-trough declines will be at least in the order of 12 per cent to 17 per cent.
SQM Research also said that without RBA intervention, peak-to-trough declines in 2020 could be in the order of 20 per cent to 30 per cent in Sydney and Melbourne.
Managing director Louis Christopher said that there are many variables.
“If the RBA does not respond and/or the bank lift interest rates again in 2019, it is possible the peak-to-trough falls in Sydney and Melbourne could be even more than this negative range.
“But we do take the view that the downturn in Sydney and Melbourne will be a significant negative for the overall economy, and so the central bank will eventually respond at some point and cut interest rates.”
Mr Christopher said that the looming negative gearing and CGT changes are weighing on investor sentiment.
“Quite frankly, implementing these changes during a housing downtown is very risky and may trip the economy into a recession.”
SQM Research predicts Hobart to be the best-performing city for 2019, with a second consecutive year of robust price and rental gains.
It also anticipates a recovery in the Brisbane and Perth rental markets in 2019, with Canberra to also record solid rental increases.
But it said that Darwin will continue to record “steep” declines in both rents and prices as the local Northern Territory economy enters recession.
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