As Australian property prices continue to fall across the country, there are divergent views on the future of house prices, and they most want to know when it is a good time to buy, hold or sell.
Five prominent economists polled recently by the Australian Financial Review believe home price declines are now perfectly normal, predicting that prices across the country will continue to fall in 2019, and Sydney and Melbourne will drag on the national average.
Each economist predicted a fall in prices in 2019 due to the credit crunch, rising mortgage rates and a surge in new supply that helped soften the market further.
Shane Oliver:, chief economist at AMP Capital, "I expect prices across the country to fall 4 percent in 2019, but mainly in Sydney and Melbourne, where prices will fall about 7 percent in 2019.
The main reason for the continued decline in house prices may be the continued tightening of lending standards and increased supply in Sydney and Melbourne.
Lower demand for overseas home purchases, lower investor enthusiasm, and lower expectations for capital growth.
A key question to consider in 2019 is whether Ausbank could be forced to consider cutting interest rates again if falling house prices start to affect consumer spending and inflation prospects.
Stephen Koukoulas, Managing Director, Market Economics
"We expect Sydney prices to fall another 7.5 percent to 10 percent in 2019 after a 7.5 percent decline in 2018. Across the country, we predict that house prices will fall by 5% to 7.5%. "
The drivers of weak prices in the next six to 12 months are clear, such as the credit crunch, a general rise in mortgage rates, a surge in new supply and a fall in rental yields.
The bank`s reluctance to cut interest rates will exacerbate the downward trend in house prices and undermine economic growth, employment and housing demand in a vicious cycle.
Starting in the third quarter of 2019, I expect prices to remain stable as supply and demand support the market. By then, housing affordability will improve greatly, and strong first-time buyers will join the army of home buyers. "
J.P. Morgan Senior Economist Ben Jarman
"We think house prices across the country will fall by about 5% next year, similar to this year. Sydney is likely to fall a little more, falling between 5% and 10% next year.
The financial environment is shrinking, borrowing capacity is falling, mortgage rates are higher. In addition, there is a large number of new stocks into the market, especially high-density housing. "
Domain economist Trent Wiltshire
"We forecast that house prices in Australia fell by about 2% in 2019 and in Sydney by about 4%.
Tighter lending conditions have led to a slowdown in housing credit growth. Homeownership loans slowed slightly, but a faster fall in home prices could further dampen investment enthusiasm, further dampening home prices.
The "wealth effect" of falling house prices is rather small for consumer spending, but a sharp drop in prices will still affect spending. If Labour is elected and house prices continue to fall, they will be cautious about "abolishing tax deductions", as it will increase downward pressure on home prices.
Mortgage rates have risen slightly, and if this goes on, the bank will consider cutting rates, although they have previously said they want to avoid it. "
Geordan Murray, Chief Economist, HIA
"We expect prices to fall by about 1 percent for the rest of 2018 and then by about 1 percent in 2019.
Sydney`s median home price is expected to decline by 3.5% in 2019. That would reduce median home prices by 12.5 percent to 13.5 percent from their 2017 peak, and that prices would be similar to those in the second half of 2016.
Regulatory intervention by Australia`s prudential regulator, (APRA), has changed the lending environment and triggered a recession. Initial investors out of the market, self-housing buyers began to become active. As we enter 2019, house prices are expected to slow further in the future.
But future population growth will remain strong, making demand for housing sustainable throughout the cycle.
The labour market has been improving, helping to boost wage growth further, but there are risks in the borrowing market.
