According to Moody’s Analytics, Australian house prices, particularly in Sydney, Melbourne, and Perth, will continue their sharp falls in advance of a moderate rebound later this year or early 2020.
Across the country, Moody’s anticipates home prices in the capital cities to drop 7.7 per cent this year. Units are also tipped for a minor 4.3 per cent decrease in 2019.
Moody’s predicts Melbourne to lead the property price decrease with an 11.4 per cent downturn in home values and a lesser 5 per cent slip in apartment prices.
In addition, the analysts forecast the city’s house price rebound will take longer starting in mid-2020.
Sydney’s house prices, in contrast, are expected to bottom out in the September quarter of this year prior to showing a fair recovery in 2020.
Moody’s Analytics are tipping a 9.3 per cent drop in house prices and a 5.9 per cent decrease in unit values over 2019. They also expect a 3.6 per cent and a 4.2 per cent rebound respectively for next year with growth in prices to accelerate further in 2021.
In Perth, despite the price falls, underlying demand is rising. Both house and apartment prices are projected to experience some further small declines , having remained in decline for approximately 5 years already.
Signs of increased lending activity are appearing due to the drop in Australian house prices
According to figures published by the Australian Bureau of Statistics (ABS), the country’s housing slump may have actually passed its peak rate of decline.
In February, the overall number of owner-occupier home loans that were secured increased by 0.8 per cent with the value of loans in this segment up by 3.4 per cent on the previous month.
Nonetheless, approvals for owner-occupier home loans are still down 12.5 per cent year-on-year.
Lending to property investors also went up 0.9 per cent in February on the previous month. However, it was still down 29.1 per cent over 2018.
Analysts such as Citi economist Josh Williamson stated that there were early indicators in the data that “the trough could be approaching”.
He said, “In yearly percentage change terms, housing finance approval values are still declining, but the pace of decline may have peaked.”
However, other analysts such as Westpac’s Matthew Hassan, are less optimistic.
“Overall, the February update was a little firmer than expected, consistent with the improved tone from auction market activity and a slowing in price declines in recent months,” he said.
“Some of the effects of tightening credit conditions may also be dissipating.
“That said, the signs of improvement are still only tentative. The market may be starting to find a base in terms of finance activity but conditions remain weak overall.”
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