housing bubble

Extent of Property Falls Surprises Mainstream Experts

Only a handful of analysts — including Port Phillip Publishing’s Vern Gowdie and Harry S Dent — were forecasting property price falls in the range of 30–40% for Sydney and Melbourne’s overheated property markets before prices began to fall in 2018.

Mainstream analysts were far more subdued in their forecasts. But many are now beginning to see the true extent of the downside facing Australia’s housing market.

NAB, for example, has revised — or rather, lowered — its prediction for property prices in Sydney and Melbourne.

According to AAP, NAB say the fall in values since the beginning of 2018 has exceeded its previous forecasts.

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A list of drops

Going off CoreLogic estimates, Sydney property prices have dropped around 14% since their 2017 peak. Melbourne’s fall has been a little less, averaging at 10%.

NAB chief economist Alan Oster admits these slides were larger than expected, saying ‘We now expect Sydney to decline by around 20 per cent from peak to trough, while Melbourne is expected to fall around 15 per cent’.

Back in January, NAB was expecting peak-to-trough declines of around 15% in both Sydney and Melbourne.

Overall, we expect some further price declines in 2019, before levelling out in 2020…[with] the weakness to be driven by ongoing declines in Sydney and Melbourne.

We expect conditions in Perth to remain weak and the other capitals to hold up better.’

NAB have estimated these ‘further’ falls to be about 7.2% for Sydney and 4.3% for Melbourne this year. As for 2020, you’re looking at another 2.5% for Sydney and 1% for Melbourne.

They’re also betting on the Reserve Bank of Australia cutting interest rates twice this year.

No way around it

Oster is attributing these declines on ‘the early prudential tightening (particularly for investors), some tightening in credit conditions (on the expenses side), waning foreign investor demand as well as weaker price expectations themselves.’

In other words, they’re unavoidable.

Chief economist at AM, Shane Oliver, is seeing even worse slums in the near future:

Overall, Sydney and Melbourne are likely to see a top to bottom fall of around 25 per cent spread out to 2020.’

Fun times ahead.

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The Australian Tribune Editorial

The Australian Tribune Editorial

The Australian Tribune is an unorthodox news service. Your Australian Tribune editorial team deliver the unfiltered stories that could impact your daily life — political and economic stories you’re unlikely to get anywhere else. And we’re not afraid to step on some toes to do it. We are honest, conservative and never dull. We are an independent service, meaning we don’t answer to shareholders or outside advertisers. This helps avoid conflicts of interest that inhibit mainstream sources, which keeps our voice independent. The Australian Tribune is owned and operated by Port Phillip Publishing.
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