Where you need to buy: The suburbs where house values are tipped to surge by 15 per cent in the next year
- Moody’s Analytics tipping 15 per cent surges in Sydney, Melbourne house prices
- Credit ratings agency saw a resurgence in 2020 after two years of downturn
- It warned rapid increase in median debt prices could cause new debt problems
Trendy inner-city suburbs of Sydney and Melbourne are set to surge in value by 15 per cent next year.
After two years of downturn, international credit ratings agency Moody’s Analytics is expecting a resurgence in Australia’s biggest cities, which they fear could cause a new debt crisis.
Median prices in Melbourne’s inner-east are tipped to climb by 15.8 per cent in 2020 – a remarkable turnaround for an area that earlier this year was Australia’s worst-performing housing market.
Trendy inner-city suburbs of Sydney and Melbourne are set to surge in value by 15 per cent next year. Median prices in Melbourne’s inner-east (Prahan house pictured) are tipped to climb by 15.8 per cent in 2020 – a remarkable turnaround for an area that earlier this year was Australia’s worst-performing housing market
Where prices are expected to surge by double-digits in 2020
Melbourne inner-east: 15.8 per cent
Sydney city, inner-south: 14.5 per cent
Sydney south (Sutherland): 12 per cent
Sydney inner-west: 11.8 per cent
Sydney north-west (Baulkham Hills, Hawkesbury): 11.1 per cent
Sydney west (Blacktown): 10.9 per cent
Source: Moody’s Analytics predictions based on CoreLogic data and Australian Bureau of Statistics regions
The recovery in upmarket suburbs is forecast to be more than double the seven per cent average for greater Melbourne.
Sydney’s city and inner-south was expected to see prices rise by 14.5 per cent.
This is significantly higher than the forecast of 7.7 per cent for greater Sydney next year.
Even Sydney’s struggling metropolitan markets were expected to enjoy a revival in 2020 with the Sutherland Shire in the city’s south tipped to see prices rise by 12 per cent.
The gentrified inner-west was expected to see prices rise by 11.8 per cent, as values in Baulkham Hills and the Hawkesbury area in Sydney’s outer north-west increased by 11.1 per cent.
Moody’s Analytics economists Katrina Ell, Xiao Chun Xu and Shahana Mukherjee forecast prices would recover dramatically in Sydney and Melbourne suburbs that were earlier this year Australia’s worst performing metropolitan housing markets.
Sydney’s city and inner-south (Redfern house pictured) was expected to see prices rise by 14.5 per cent. This is significantly higher than the forecast of 7.7 per cent for greater Sydney next year
They predicted the Reserve Bank of Australia’s decision in October to cut interest rates to a new record-low of 0.75 per cent would mainly drive a recovery in Australia’s biggest housing markets.
‘The RBA is being forced to do the heavy lifting to get the economy out of its funk,’ the economists said.
‘This could trigger a pick-up in the Sydney and Melbourne housing markets that is more aggressive than forecast and out of comfort levels for policymakers.’
Moody’s Analytics was worried a sharp recovery would cause new debt problems.
‘That is because such a pick-up would likely lead to further household leveraging — a problem given that households have not deleveraged at an aggregate level,’ they said.
Australia’s household debt-to-income ratio stands at a record 190 per cent, which is second in the world after Switzerland.
Even Sydney’s struggling metropolitan markets were expected to enjoy a revival in 2020 with the Sutherland Shire in the city’s south tipped to see prices rise by 12 per cent (pictured is Oak Park Beach at Cronulla)
House price forecasts for 2020 in the other capitals
Hobart: down 1 per cent
Adelaide: up 1.4 per cent
Perth: down 0.7 per cent
Brisbane: up 2 per cent
Canberra: up 5.1 per cent
Darwin: down 2.4 per cent
Since peaking in 2017, Sydney’s had fallen by a record 17.4 per cent as Melbourne’s equivalent values fell by 14.8 per cent.
House and apartment prices have since been recovering every month since June.
The recovery began as the Australian Prudential Regulation Authority, the banking regulator, relaxed restrictions it had imposed two years earlier on investor and interest-only loans.
With standard variable mortgage rates falling close to three per cent, APRA also scrapped a requirement for lenders to model a borrower’s ability to service a home loan with a 7.25 per cent lending rate.
Moody’s Analytics also noted the RBA could embarking on unconventional monetary policy, like quantitative easing or the buying of government bonds, should the cash rate be cut again to a new record-low of 0.5 per cent.
Australia is now just three rate cuts away from having zero interest rates.
Any lower, it would have negative interest rates like Switzerland, Denmark, Sweden and Japan.
Hobart, Australia’s best performing housing market in 2019, was expected to decline by one per cent in 2020 along with Perth (down 0.7 per cent) and Darwin (down 2.4 per cent).
Increases were expected in Canberra (up 5.1 per cent), Brisbane (up two per cent) and Adelaide (up 1.4 per cent).