The housing market in Australia seems to be in freefall with Melbourne, Sydney and Perth continuing to lead the rest of the country as prices tumble by the week. But many people think now is the best time since March 2015 to buy property, according to Westpac economists(1). The last time property prices fell to this extent, mortgage rates were about 17 per cent, unemployment was six per cent (rising its way to 11) and the nation was falling into the recession of 1989(2), the one the then PM Paul Keating said ‘we had to have’. But how far prices will fall in 2019 is a moot point and it depends on who you ask. Some say the drop will ease through 2019 and rise again by 2021; Westpac(1) sees it as a market ‘correction’ and others are predicting a time bomb.
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House Price Forecasts
There’s a lot of confusion going on the state of the housing market, especially from the different standpoints shared by the media. Some questions many prospective home-buyers are having are: how far prices will fall, whether the prices will continue to fall, and how it will all of this impact the chances of owning a home. Some see the decline in property prices as a good thing because houses will be more affordable, especially for first home buyers. However, the recent uncovering of bad lending practices by the Banking Royal Commission have meant home-buyers will face more difficulty in attaining a bank loan. This will lead to an uneven balance of limited buyers to the boom in available properties (especially apartments), further worsening the drop in house prices. The latest decision (December 4, 2018) by the Reserve Bank of Australia (RBA) to keep rates on hold at 1.5 per cent marks the 26th month rates have been steady. Most experts believe this means rates will remain low at least until February 2019 – which is a hopeful contrast from the time of recession in the 1989 housing situation.
At Listed & Sold Real Estate, we understand the local market – Our family is there for your family and Arthur and Myrian also have a property development business so they understand property from various aspects
How Far Will Prices Fall?
If you combine all of the above with the uncertainty around the next Federal election (possibly in May 2019), with pundits believing Labor will win and bring in damaging changes to housing markets, then confidence in housing investments would inevitably suffer. Morgan Stanley’s most recent forecast has national property prices plummeting by up to 15 per cent. This means the market is looking at the largest price drop in decades. The company’s forward-looking housing model has fallen to the lowest level that has ever been recorded(3).
Figures from CoreLogic show(4) prices fell 0.7 per cent across Australia in November (2018). There was a 0.1 per cent drop in the regions and a 0.9 per cent tumble in the capital cities.
- Melbourne – Property price reductions have been less so than in Sydney at 1 per cent in November, and 5.8 per cent from top to bottom. But Melbourne’s price fall began in November of 2017, which was four months after Sydney. In Melbourne’s inner east, prices have flopped almost 12 per cent and in the inner-south, 9.4 per cent.
- Sydney – (n November, house prices fell 1.4 per cent, taking the city’s all-round top-to-bottom dive to 9.5 per cent — almost the same as the historic fall of 9.6 per cent in 1989 – 1991, when interest rates were off the wall and Australia was heading into the recession.
In contrast, interest rates in Australia are at historic lows, there’s healthy economic growth, and unemployment is now around 5 per cent.
2019 looks set to be an interesting year for home-buyers, where it takes an impressively knowledgeable expert to try and accurately predict what it will cost to buy a home. If you’re looking at buying property and don’t quite know where to start amidst the varying housing predictions of 2019, contact Arthur Bourantanis at Listed and Sold in Melbourne on 0423 781 694 – email email@example.com, or Myrian Bourantanis on 0413 957 653 – email firstname.lastname@example.org
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