Sydney house prices to fall 8 percent from 2017 peak: BIS Sydney forecast
Sydney's median house price is forecast to bottom out at eight percent below its June 2017 peak, according to BIS Oxford Economics latest forecast.
It will still sit four percent below the peak by June 2021, the industry analyst and economic forecaster has predicted.
Sydney’s estimated median house price of $1,120,000 at June 2018 represented a seven per cent increase over the prior 12 months, after recording a substantial 85 per cent rise over the prior five years.
BIS have forecasted an aggregate price growth of three percent between June 2018 and June 2021.
By 2019/20, a combination of the correction in prices, the undersupplied market and some improvement in the economic outlook is forecast to see prices stabilise, and potentially show modest rises into 2020/21, BIS suggests.
The economic forecaster said that although the unit market has a greater exposure to the downturn in investor demand, it appears that the stronger first home buyer demand is helping to support prices.
Nevertheless, median unit prices are expected to have fallen four per cent in 2017/18, with a further fall of three per cent forecast for 2018/19.
By June 2021, the median unit price is forecast to be five per cent off its peak, and 14 per cent lower in real terms.
Investors were the key to the upturn, having consistently accounted for over half the value of residential loans since 2013, compared to around 40 per cent over the prior five years, says BIS Oxford Economics senior manager Angie Zigomani.
However, continued tightening in bank lending policy directed by the Australian Prudential Regulation Authority (APRA) has caused investors to retreat from the market, which in turn has resulted in the price decline over 2017/18.
“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,” he said.
“This has caused prices to ease as Sydney prices revert to a level that is more affordable under these conditions.”
Owner occupier demand remains elevated, with first home buyer demand particularly strong in response to State Government stamp duty exemptions.
However, owner occupier demand appears to have topped out, and with tight lending conditions expected to continue to discourage investors, overall demand will fall, with the median house price also forecast to fall by two per cent in 2018/19.
Rising new dwelling completions will see the erosion of some of Sydney’s dwelling deficiency, although the market is likely to remain undersupplied which will prevent larger falls in prices.
