Ok, it is a “worst case scenario”. But Sydney residential property prices are tipped to fall by up to 10 per cent in the next 12 to 18 months, according to BIS Oxford Economics senior manager Angie Zigomanis.
Australian economics professor, Steve Keen is predicting a 5-10 per cent national fall in 2018, with the decline concentrated in markets with the most speculative activity – Sydney and Melbourne.
AMP Capital chief economist Shane Oliver has forecast that Sydney prices would fall by 5 per cent this year.
So it looks like the experts may disagree about how much – but all are predicting home prices are coming down in the year ahead.
Already, Sydney property prices are down 2.2 per cent, well below the market’s peak in August 2017 when prices shot up by more than 17 per cent, says Tim Lawless, Research Director at property research data group, CoreLogic.
Nationally, property markets ended 2017 with a whimper, with half of Australia’s capital cities recording an average price fall of 0.4 per cent in December.
Morgan Stanley also said that Australia’ housing market is set for a “sustained weakness” with both prices and building activity tipped to fall.
ANZ which has a significant exposure to the property market through its home loan portfolio, is less pessimistic, predicting a price decline of 2 per cent this year before picking up in 2019.
One of the most optimistic predictions comes from Louis Christopher boss of SQM Research who has forecasted a strong national average growth of 4 to 8 per cent this year.
With inflation likely to remain low and wages growth stubbornly weak, it is unlikely that official interest rates will change this year, said Deutsche Bank economist Adam Boyton.
Housing is by far Australians’ biggest asset, worth a total of $6.8 trillion across the country according to ABS estimates. A little over $1.7 trillion in outstanding home loans make up more than 60 per cent of Australian bank assets.
Typically, property prices double every seven years to 10 years after a strong market cycle.
For most home owners who have held their properties for more than 10 years, the predicted downturn, may mean that they will continue to hold on to their property rather than sell..
Home owners with most to lose if the predictions come true, are those who bought in the last six months of 2017, because their property values have fallen since, says CoreLogic.
But for those looking to get into the residential market, 2018 may well be a good year to buy.