The latest BIS Oxford Economics report has reaffirmed what everyone has been saying about the nation’s largest property markets, revealing that Sydney and Melbourne house price growth is “on track” to shift into negative territory in 2018.
The strength of investor demand has been the key driver of the Sydney and Melbourne residential markets, with tightening credit conditions and regulatory changes slowing house prices in Australia’s largest real estate markets.
BIS’ Residential Property Prospects 2018 to 2021 report says this fall in investor demand directly translates into a decline in new dwelling commencements, which have dropped from a peak of 233,600 in 2015-16, to an estimated 220,400 in 2017-18.
BIS Oxford Economics study author Angie Zigomanis says low interest rates and a relatively stable economic environment may lessen the prospect of a major market correction.
Across the country strong population growth is also underpinning occupancy, “which in turn should help investors generate rental income,” and “prevent excessive forced sales coming to market”.
“Supply is running at record levels, having risen above 200,000 dwelling completions per annum in 2015-16, and expected to stay above this level through to 2018-19,” Zigomanis said.
“Demand has also risen, with population growth expected to exceed 400,000 persons in 2017-18, its highest level since the peak in net overseas migration in 2008-09, although this will still not be sufficient to meet supply.”
In good news for Brisbane’s housing market, house prices are expected to perform well thanks to steady interstate migration and Brisbane’s attractive median house price which sits at about $550,000.
A current oversupply of dwellings, particularly the apartment market, will ensure the upside won’t be immediate.
Brisbane’s house price growth is expected to be modest at 2- to 3 per cent to 2019-20, before greater growth of six per cent forecast in 2020-21.
Canberra and Perth were also tipped as strong performers, with each forecast for 10 per cent price growth over the next three years. While Hobart, which has been going from strength to strength, is expected to see 8 per cent growth by mid-2021.
The apartment market is likely to face more challenges than the housing market in the coming years, which BIS attribute to actions taken by the Australian Prudential Regulation Authority in 2017.
“Similarly, greater downside is expected in the unit market, which is more reliant on the investor market to drive sales and price growth. Without the same level of investors and without the same growth in new supply, the detached housing market should hold up better compared to units.”