According to BIS Oxford Economics, house prices in Australia will remain steady over the next financial year although some markets may decline as the crunch on investor lending and rising levels of new housing stock weigh on residential property market.
All major housing markets have recorded a price growth slowdown over 2017-18 except for Hobart. Melbourne and Sydney have even recorded a decline. Most capital cities are expected to see price declines in the short term because but the chances of a major price correction is mitigated by a stable economy and low interest rates. An apartment glut is expected in some locations in many capital cities as well.
The report predicts Sydney house prices will continue to fall by 2% over the coming financial year and its median house price will likely remain below its June 2017 peak in the next three years. Sydney’s median house price in June 2018 is $1,120,000. First-home buyers, however, support unit prices which were anticipated to fall by 4% this financial year and by 3% in 2018-19.
Melbourne, on the other hand, has a record population growth that fuels housing demand and undersupply. New dwelling completions are expected to rise but supply will be met by population growth. Its house prices will rise below the inflation pace but a downturn in new dwelling construction may increase the prices. An oversupply is not expected but there will be a few apartment oversupply because of the extent of new unit construction. Unit prices are expected to fall by 2% in three years. Melbourne’s current median house price is $870,000.
Meanwhile, Canberra’s median house price in June 2018 is $700,000 and it is expected to gain momentum in the next three years. House prices are predicted to increase by 5% with a 10% increase by 2021. Apartments may experience a 6% price growth in the short term. Construction may also slow down, putting an upward pressure on property prices but it has recorded a low 0.7% vacancy just last March.
Brisbane’s current house price is $550,000 and there is an apartment oversupply that can cause a modest price increase in the next two years. While interstate migration is increasing, economic conditions still need to pick up and excess stock needs to be absorbed. Construction is slowing down and because of population growth, house prices may increase by 13% or $70,000 by 2021.
Perth house prices, on the other hand, have fallen by 13% since 2014 but it may be bottoming out. Vacancy rate remains high at 5.1% as rents fall by up to 30% since 2013 but house prices are predicted to keep up with inflation in the next three years, growing by around 10% while unit prices could increase by 5%.
Meanwhile, Hobart has recently recorded strong house price growth because of interstate migration. The median house price may increase by 5% in the next year and slow down in the coming years. By 2021, house and unit prices are expected to grow by 8%. Unfortunately, Adelaide may experience modest house price growth in the short term because of the high unemployment rate and the automotive manufacturing shutdown. House prices are anticipated to increase by 9% by 2021, though.
Lastly, Darwin house prices have dipped by about 20% since 2014 but like Perth, it may also be bottoming out. An oversupply may result to a flat price over the next financial year with two years of limited growth but house and unit prices are expected to increase by 5% and 4%, respectively.
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