House prices in Australia’s biggest city are forecast to keep falling for another three years as tighter lending rules scare off investors and a record number of new homes are built.
Real estate values in Sydney peaked at $1.2 million in June 2017 but they are expected to dip until 2021.
BIS Oxford Economics forecasts Sydney’s median house price to fall to $1.15 million in three years’ time, representing a drop of four per cent from their peak a year ago.
House prices in Australia’s biggest city are forecast to keep falling for another three years as tighter lending rules scare off investors and a record number of new homes are built (Vaucluse in Sydney’s eastern suburbs pictured)
During that period, they are tipped to bottom out at $1.1 million marking an eight per cent, or $96,000, fall from June 2017.
The economic forecaster’s senior manager Angie Zigomanis said that after average annual house price increases of 13 per cent, between 2012 and 2017, young people would have an easier time getting into Sydney’s expensive housing market.
‘It will give them some time to look without prices running prices ahead of them,’ he told Daily Mail Australia on Monday.
The Residential Property Prospects 2018 to 2021 report, released today, blamed the Australian Prudential Regulation Authority’s crackdown on investor loans for driving away prospective landlords in the New South Wales capital.
Real estate values in Sydney peaked at $1.2 million in June 2017 but they are expected to dip until 2021 (Parramatta in the city’s west pictured)
‘Lower loan-to-value ratios and rises in interest rates for investors and for interest-only loans have reduced investors’ ability to borrow and bid up prices for dwellings on the market,’ it said.
‘This has caused prices to ease as Sydney prices revert to a level that is more affordable under these conditions.’
A record supply of new homes, running at 200,000 a year since 2015, has also helped to bring down Sydney’s expensive house prices, which are now at a median level of $1.12 million.
While investors are turning away, owner-occupiers are still keen on a new house, with the New South Wales government making new and existing homes stamp-duty free for first home buyers stumping up for a property worth up to $650,000.
Sydney’s median house prices are tipped to rise by a sluggish three per cent during the next three years, the slowest pace of all the capital city markets.
Melbourne was expected to be insulated from massive price drops, with the Victorian capital’s median house price rising from $870,000 now to $920 by 2021, marking a six per cent increase over three years (a house at Campbellfield in the city’s north pictured)
Mr Zigomanis said double-digit annual house price growth in Sydney would be unlikely during the next five years, with interest rates already at a record-low of 1.5 per cent.
‘Unless you get a massive bout of inflation or a much bigger price shock, affordability constraints will prevent prices racketing up as quick as they have been,’ he said.
Melbourne was expected to be insulated from massive price drops, with the Victorian capital’s median house price rising from $870,000 now to $920,000 by 2021, marking a six per cent increase over three years.
Brisbane was forecast to enjoy an even more generous price increase, as median house prices climbed from $550,000 to $620,000, or 13 per cent.
Perth and Canberra were tipped to enjoy 10 per cent price increases between now and June 2021, as median prices climbed to $570,000 and $770,000 respectively.
Adelaide prices were expected to increase by nine per cent to $555,000.
Hobart was tipped to post price increases of eight per cent by June 2021 to $525,000.