The country's falling property prices will stabilise next year before moving into a moderate growth phase, new research from Domain Group has predicted. Domain's first Property Price Forecast has modelled median house and unit prices in the capital cities to the end of 2020.
Domain Group economist Trent Wiltshire said solid population growth, low unemployment and low interest rates underpin property price growth in the period to the end of 2020. "We think the market will correct itself in 2019, and then change gears into a cycle of modest growth into 2020," Mr Wiltshire told 9News.
Domain predicts unit prices will be more resilient, in part due to stamp duty concessions in Sydney and Melbourne. Unit prices are expected to grow nationally by two percent in 2019 and three percent in 2020 after bottoming out to their 2016 levels early next year. Domain's forecasts are based on what the group believes is most likely to play out over the next two years.
But it warns the positive forecasts could be thrown out by mortgage rates rising earlier than expected, slower population growth, forced selling by investors, and a slowdown in the Chinese economy.
Labor's proposed changes to negative gearing, should it win next year's federal election, could weigh on house prices in long-term but may also provide a short-term boost.
"I think for people looking to buy there's still some bargains to be had," Mr Wiltshire said.
In Sydney, house prices are currently eight percent below their peak and will be close to unchanged to December 2019 before modest growth in 2020. "For Sydney, we're seeing house prices unchanged in 2019 and to grow by about four percent in 2020," Mr Wilshire said. The median house price should reach a low point of just over $1 million in mid-2019, a fall of about 12 percent from the peak of $1.2 million in June 2017.
"On our forecast, the price falls for Melbourne and Sydney will be the biggest since the late 1980s," Mr Wiltshire said. Over the past four weekends, more than 1100 properties across the city have failed to sell at auction across Sydney.
Mr Wiltshire said this combination of high supply and fewer buyers typically brings lower prices.
For apartments, however, he said prices will continue to fall by an average three percent this year, and are expected to rise by the same amount next year and then a further five percent in 2020.
There's some good news for Melbourne home owners following a turbulent twelve months for the city's property markets. After a nine percent fall in house prices this year, the Domain research shows a further decline of about one percent next year, before growing by around four percent in 2020.
"That's probably driven by things like the royal commission, and tighter bank lending standards playing out into 2019," Mr Wiltshire said.
The house market peaked at the median price of $910,000 in December last year, with Domain's report forecasting it will bottom out just above $800,000 in mid-2019; a level equivalent to late 2016.
Unit prices are expected to grow by about one percent in 2019 and 2020, after a fall of up to two percent this year.
Thanks to a slow down in construction and a strong population growth, Domain said Brisbane median house prices should rise by four percent in 2019 and five percent in 2010 after a flat year to date.
The rise puts Brisbane right near the top of Australia's fastest growing markets.
"For Brisbane, we see some of the strongest price growth in the nation over the next couple of years," Mr Wiltshire said.
"That's a lot to do with people moving from New South Wales and Victoria to Queensland due to more affordable housing."
After falling by about six percent this year, unit prices in Brisbane are also expected to grow over the period to the end of 2020.
"We see a bit of a turn-around coming in 2019 after a few years of price falls, and we're predicting unit prices in Brisbane to increase by about three percent over the next couple of years," Mr Wiltshire said.
Elsewhere in Queensland, some areas are already experiencing growth.
In Caboolture, prices have grown by almost 10 percent in the last year and unit prices have jumped by 17.5 percent.
Adelaide house prices will continue to rise steadily over the next two years. The Domain property report shows South Australia has performed well this year, compared to other mainland states.
"We're seeing house and unit price growth to maintain at about two percent over 2019 and 2020 and this slow and steady growth is a continuation of what's been happening in the Adelaide market for the last few years," Mr Wiltshire said.
Domain is cautious about Adelaide's population and employment growth.
SA has fewer property investors, with two thirds of new bank loans being taken by owner-occupied homebuyers.
For units, there has been a one percent price drop this year, but that's expected to turn around with a two percent rises in 2019 and 2020.
Domain expects Perth house prices will grow faster than most other markets in 2019 and 2020 after falling in recent years. Prices are predicted to level out by early 2019 after falling 13 percent from the 2014 peak of $616,000, including a five percent fall this year. Prices will then grow by five percent in 2019 and another three percent in 2020, Domain predicts.
Unit prices are expected to fall by about six percent in 2018, before growing by about two percent in each of 2019 and 2020.
With prices falling in recent years after the end of the mining boom, Domain attributed the incoming growth to better economic conditions such as higher commodity prices and population growth.
The Tasmanian capital is on track for the fastest growth in the country in 2018 at 12 percent. That would leave house prices 40 percent higher than the start of 2016, but Domain predicts the growth will slow to two percent over the next two years as mainland housing becomes better value for buyers.
Unit prices in Hobart should remain stable in 2019 before seeing some modest growth in 2020.
The research suggests house prices in the nation's capital will grow by about two percent in 2018 and then four percent in each of the next two years. Low unemployment and strong population growth underpins Domain's forecast for price appreciation. The forecast for unit prices in Canberra are more uncertain but Domain predicts slower growth than houses.
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