Australia | Jul 15 2019
BIS Oxford Economics sees prices for houses and apartments stabilising, then rising in the years ahead. The forecasters provide projections for housing prices across Australia's major cities and regions.
By Greg Peel
BIS Oxford Economics estimates Sydney house prices fell -18% in the two years to June 2019. The pullback has improved housing affordability, and the easing of credit conditions – two RBA cuts and a reduction in APRA’s mortgage serviceability threshold – should lead to price growth stability through FY20.
Not to mention the threat of negative gearing being scrapped now past.
However the pipeline for dwelling completions will remain relatively high in FY20, BIS notes, which will dampen price growth. The economists forecast a 6% rise in the median house price to June 2022.
Investor demand remains constrained by tighter credit conditions, and new housing supply is concentrated in the apartment sector, hence BIS sees apartment prices rises only 1% in the same period. Supply will nonetheless fall away sharply from FY21, hence price growth should accelerate beyond this time.
We might also note that by FY21, there may be few new apartment blocks left uncondemned.
The NSW government’s stamp duty exemption for first home buyers did little to support entry into the Sydney market, given a cap of $700,000 of property value. The satellite cities of Newcastle and Wollongong nevertheless benefited, BIS notes.
Prices in each centre did not rise by as much as those in Sydney and as such have not fallen as sharply. Of the two, Wollongong is closer to Sydney and thus more influenced by Sydney pricing, hence BIS forecasts a 5% price rise to June 2022.
Greater affordability in Newcastle should lead a 9% price increase.
Melbourne house prices have followed Sydney’s down in falling -15% from the December 2017 peak. And like Sydney, Melbourne will remain constrained by the level of new supply over FY20 before an FY21 supply drop-off provides a price boost.
BIS forecasts a 7% gain for Melbourne house prices to June 2022 and, like Sydney, only 4% for apartments.
Brisbane has been hit not only by a surfeit of supply but also by a weak Queensland economy, however this means prices in Brisbane remain comparatively affordable. To that end, BIS sees lower rates and easier credit conditions as providing a boost as the economy improves and the market moves into an increasing deficit.
The economists forecast a 20% price rise to June 2022 for Brisbane, mostly concentrated in latter part of the period. Apartment prices are expected to lag, rising 14%.
The Gold Coast and Sunshine Coast have seen solid price rises as strong migration flows have met undersupply. Vacancy rates are low but supply is now rising, BIS notes. This will drag on prices.
BIS forecasts a 9% price rise on the Gold Coast to June 2022 and 7% for the Sunshine Coast.
Further north, the collapse in mining investment has weighed on Townsville house prices. Investment has now troughed, nonetheless, and vacancy rates are beginning to tighten. This should lead to rising prices.
BIS forecasts 9% to June 2022.
Cairns is not exposed to the mining sector and has enjoyed moderate house price growth in recent years. To June 2022, the economists forecast 6%.
Strong South Australian economic growth has met undersupply in Adelaide, leading to modest house price growth. Affordability remains attractive and should improve on lower rates and easier conditions.
BIS forecasts house price growth of 11% in Adelaide to June 2022 and 6% for apartments.
The downturn in mining investment has led to an extended house price downturn in Perth of -27% from the March 2007 peak. Affordability has improved significantly but the Western Australian economy remains weak, there is excess supply and population growth is tepid.
BIS sees no near term improvement ahead of FY21, as the economy finally picks up and excess supply is absorbed. A house price rise to June 2022 of 7% is forecast, and given undersupply, an 8% rise for apartments.
House price growth in the capital has been muted since FY18 due to record apartment supply, a looming federal election, and the NSW stamp duty exemption luring buyers across the border.
Now that the election has been run and won, and the ACT plans to introduce its own stamp duty exemption, some price growth is expected to return.
BIS sees a 10% increase for both houses and apartments to June 2022, weighted toward the latter end of the period.
Surging prices in Sydney and Melbourne have sparked an exodus south in recent years, in search of a quieter lifestyle and more affordable housing. However, demand has pushed prices up 36% since June 2018.
So now affordability is more challenging, and hence the exodus is expected to slow. BIS forecasts 4% price rises for both houses and apartments to June 2022.
Worst hit by the downturn in resource sector investment has been Darwin, leading to high unemployment, low migration and population growth, and a house price decline since FY15.
The market is in oversupply and vacancy rates are high, making the city very affordable. However, without a strong turnaround in the economy and improvement in the demand/supply balance, BIS expects only modest house price growth.
The economists forecast 7% for houses and 8% for apartments out to June 2022.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.
FNArena is proud about its track record and past achievements: Ten Years On