House prices across the country will remain flat over the coming financial year, with some markets tipped to dip into decline, according to a leading economic forecaster.
BIS Oxford Economics has joined the chorus of economic heavyweights warning the slowdown of the housing sector will likely continue in the short term.
Every major housing market except Hobart had recorded a slowdown in price growth over 2017-18, the report asserted, with Melbourne and Sydney on track to record an overall decline in prices. Taking inflation into account, modest price declines were forecast in most capital cities.
But the report’s author, Angie Zigomanis, said the prospect of a major price correction was being mitigated by low interest rates and a relatively stable, albeit subdued, economic environment.
BIS Oxford Economics has also anticipated an apartment glut across most capital cities, where investors had previously driven record levels of construction.
Median house price in June: $1.12 million
The downturn in Sydney prices is expected to continue, with the report predicting house prices to fall by 2 per cent over the next financial year.
The combination of a price correction, undersupply and some improvement in the economic outlook could lead to modest rises in 2020-21, the report found. Despite this, the city’s median house price is forecast to remain below its June 2017 peak over the next three years.
In the face of retreating investor demand, the report asserted that first-home buyer activity was supporting unit prices. Nevertheless, median apartment prices were forecast to fall 4 per cent this financial year and a further 3 per cent in 2018-19.
Median house price in June: $870,000
Record population growth continues to fuel demand for housing, maintaining an overall undersupply in the market, the report stated.
“While new dwelling completions are forecast to continue to rise through 2018, as the large pipeline of apartment buildings under construction work their way to completion, supply will be largely met by population growth,” Mr Zigomanis said.
House prices are forecast to tread water through to 2021, rising below the pace of inflation. The report said the emerging downturn in new dwelling construction could spark a modest uptick in prices.
Although the wider market is not expected to tip into oversupply, BIS Oxford Economics anticipates there will be pockets of apartment oversupply given the extent of new unit construction compared to houses. Unit prices are forecast to fall 2 per cent over the next three years.
Median house price in June: $700,000
Canberra’s housing market has proven to be somewhat of a quiet achiever in recent years, with momentum tipped to continue in the short term.
House prices are forecast to increase 5 per cent over the next financial year before slowing over the following two years, culminating in an overall rise of 10 per cent by 2021. Apartments were tipped to record price growth of 6 per cent over the next three years.
A construction spree in the country’s capital is expected to dampen upward pressure on property prices, according to BIS Oxford Economics.
The report noted Canberra’s rental market was very tight, recording a 0.7 per cent vacancy rate in the March quarter.
Median house price in June: $550,000
An oversupply in the apartment sector is dragging down Brisbane’s wider housing market, which is forecast to record modest price rises over the next two years.
But interstate migration is starting to ratchet up, with Sydneysiders in particular moving to the sunshine state, the report noted.
“Some green shoots look like they are starting to emerge in the Brisbane market,” Mr Zigomanis said. “However, any upturn is likely to be delayed until economic conditions pick up and excess stock is further absorbed.”
A slowdown in construction, coupled with population growth, will see the median house price lift by an anticipated 13 per cent, or $70,000, by 2021.
Median house price in June: $520,000
Since 2014, Perth house prices have declined by 13 per cent, but the worst of the housing slump could be over. “House prices in the Perth market appear to be bottoming out,” Mr Zigomanis said, pointing to stronger overseas migration and a reduction in the number of West Australians moving interstate.
Perth’s vacancy rate remains high at 5.1 per cent and rents have collapsed, falling by up to 30 per since since 2013.
The report predicted the recovery of the Perth market would be a “long, slow grind as the city has to work through a significant oversupply…”
House prices are expected to keep up with inflation over the next three years, growing by about 10 per cent, while unit prices are forecast to rise by just 5 per cent.
Median house price in June: $485,000
Hobart has bucked the nationwide trend and recorded solid house price growth in recent years. This has been driven by interstate migration, with Hobart gaining the lion’s share of population growth.
Mr Zigomanis said previous migration booms in Tasmania had stemmed from people over 50 looking to downsize and experience a tree change.
“However the current migration inflows largely comprise younger adults and families with children, suggesting people moving for Hobart’s affordability or expats coming back to raise a family,” he said.
The median house is tipped to rise by 5 per cent over the net year, and then slow in following years. Both houses and unit prices are forecast to grow by 8 per cent by mid-2021.
Median house price in June: $510,000
A soft economic environment and lacklustre population growth will result in modest house price growth over the coming years, the report found.
“Economic conditions in South Australia are expected to remain subdued in the short term,” Mr Zigomanis said, pointing to a high unemployment rate and the shutdown of automotive manufacturing. “Purchasers are expected to become more cautious.”
House prices are expected to grow by 9 per cent by 2021.
Median house price in June: $505,000
Darwin house prices have nosedived by almost 20 per cent since 2014, but the report’s authors said they expected them to have bottomed out.
A general oversupply means prices are forecast to remain flat over the upcoming financial year, followed by two years of limited growth.
House prices and unit prices are expected to life by 5 per cent and 4 per cent respectively.
Resource from Domain