Real estate research and consulting firm SQM Research has slashed home price forecasts for Australia's five capital cities, including Sydney, Melbourne, Brisbane, Canberra and Darwin, with Perth, Adelaide and Hobart spared.
House prices in Sydney have fallen from an estimated 4-8 percent growth last year to-4 percent to zero this year, according to the Domain real estate website. House prices in Melbourne have been cut to-3-1 percent this year from 7-12 percent growth forecasts last year.
Prices in Canberra, the capital, have been cut from 5% to 9% to 1% to 4%; Brisbane from 3% to 7% to 0 to 3%; Darwin from 1% to 4% to-5% to 0%. The average growth forecast for Australia has been cut to-2% to 2% from 4% to 8%.
Previous forecasts were released in October last year, but SQM said: "important indicators such as the clearance rate of auctions in recent weeks, total asset lists and asking prices show that market conditions are deteriorating further."
SQM does not expect a widespread collapse in house prices this year, but argues that (APRA), the Australian prudential regulator, has added to the pressure on the domestic property market by strengthening its supervision of the mortgage market.
SQM analyst Christopher (Louis Christopher) said: "current data show that reducing the risk of loans is affecting the real estate market across the country." "this action, mainly aimed at real estate investors, triggered a decline in demand for residential housing."
Since 2014, APRA has introduced several measures aimed at reducing the risk of the mortgage market-investors and interest-only loans have been a major concern.
As a result, the number of investor loans and interest-only loans at large banks has plummeted, which experts say will not see a massive recovery in the short term.
Although APRA lifted restrictions on investor lending on April 26th, UBS's (UBS) economists said the move "means that the tightening of lending standards is faster than our expectations of the underlying situation". The APRA is preparing for more sustained measures in the market, with a focus on responsible lending. "this increases the risk of a significant negative impact on housing and the economy."
SQM said the fall in Sydney this year could be a result of the APRA policy. ""SQM is of the view that, assuming the recent announcement by APRA (the cancellation of the investor's loan-limited) policy, real-estate investors return to the market at a lower rate, and the city of sydney may now have a fall in that year, or it would be the best, however, the price."," said Christopher.
The new forecast is based on the fact that the APRA will not take further steps this year, and that the official cash rate of the Reserve Bank of Australia, (RBA), will not change.
