A new report has added to speculation that Australia's housing market is due for an imminent decline – but it could be far worse.
Sydney capital gains have been forecast to slow dramatically this financial year, and prices are expected to go backwards in 2016-17 and 2017-18, according to a new QBE housing outlook prepared by BIS Shrapnel – but an underlying housing shortage is set to soften the blow.
The report forecast that median house price growth will slow from 22.3 per cent in 2014-15 to 7.3 per cent in 2015-16 – and that prices will then fall 2.7 per cent in 2016-17 and another 2.3 per cent in 2017-18.
Unit median prices are expected to follow a similar trajectory, with growth of 14.6 per cent in FY15 to be followed by growth of 4.8 per cent in FY16, a decline of 2.7 per cent in FY17 and a decline of 3.5 per cent in FY18.
QBE said prices would fall even further if not for a “sizeable and sustained” underlying housing shortage.
Investors have been largely responsible for the Sydney boom, but the regulatory crackdown of the past few months has triggered a rise in investor mortgage rates and helped change the market, according to the report.
“Interest rates are forecast to rise further, and tightening bias by the Reserve Bank during 2016-17 is likely to weigh on affordability and purchaser confidence. Investors are expected to seek higher yields to compensate,” it said.
Meanwhile, Brisbane is predicted to be the standout performer between 2015-16 and 2017-18.
The report has forecast cumulative price growth of 13.2 per cent for houses and 2.3 per cent for units.
Hobart is forecast to experience a 4.9 per cent increase in house prices and a 2.2 per cent decrease in unit prices, while Canberra house prices are expected to rise 3.4 per cent and unit prices fall 2.7 per cent.
Melbourne values will climb 2.8 per cent for houses but fall 4.9 per cent for units.
Adelaide house prices will go up 0.8 per cent, while unit prices will fall 0.8 per cent.
Australia’s two struggling markets will remain depressed between now and FY18, according to the report. Perth is forecast to experience a decline of 2.4 per cent in house prices and five per cent in unit prices, while Darwin is expected to see falls of 2.5 per cent for houses and 5.2 per cent for units.