• 14/06/2024

Housing Downturn Shallow and Short-lived

Mark Mulligan| Australian Financial Review| 21 June 2018


Australia’s housing slump could prove short-lived, according to a report from CoreLogic and Moody’s, with solid employment growth, loose monetary policy, decelerating supply and easing of some controls on lending helping to lift prices across the country after this year’s shallow dip.

CoreLogic-Moody Analytics’ latest Home Value Index Forecast sees Sydney house prices recovering next year after a total 5 per cent decline for 2018. Healthy demand for apartments, meanwhile, will help this segment retain its value in 2018.

Nationally, house values will fall 0.5 per cent throughout 2018 after climbing 8.6 per cent in 2017, the report finds.

Although there are divergent scenarios from state to state and suburb to suburb, the report’s broadly upbeat outlook for the housing market contrasts sharply with a slew of bad news in recent months. The optimism stems mainly from the healthier macro-economic picture.

“Although the Australian economy is in its 27th year of recession-free expansion, the results over the past three years have been lacklustre. This looks to be changing,” CoreLogic-Moody’s says.

“The underlying growth engine has improved such that GDP growth is forecast to hit 3.1 per cent in 2018, which we estimate is around the economy’s potential, up from a 2-3 per cent expansion in 2017.

“Business investment is on an uptrend; non-mining investment is the driver, picking up the slack from cooling mining investment.

“Employment is growing around 3.1 per cent year-on-year, which is comfortably above its 1.9 per cent long-term trend, and highly accommodative monetary policy settings will stay put through 2018,” the report says.

All this should translate into improved property prices, or at least a deceleration in value declines in the worst-hit cities and segments.

House values across Brisbane are forecast to see a mild 1.4 per cent gain in 2018, with strength in west Brisbane and inner Brisbane offsetting declines in south Brisbane,” according to CoreLogic and Moody’s.

Even the apartment market, which has been battered by oversupply, will end the year up just under 1 per cent, with recovery in east Brisbane offsetting decline in the inner-city, they say.

The outlook for Melbourne, too, is not as bad as other forecasters predict.

CoreLogic-Moody’s sees house values in Australia’s second-biggest city rising 1.5 per cent this year, although some declines are seen for the inner-city. The apartment market is expected to hold up and advance 4.3 per cent in 2018.

House values in Perth will see another year of decline, with a 0.5 per cent decline forecast for this year before a 2.2 per cent recovery in 2019, driven by the steadily recovering local economy,” the report says.

“Meanwhile, Adelaide’s housing market will continue its unremarkable run, albeit at a moderating pace,” CoreLogic-Moody’s finds.

It said house values in the South Australian capital would end 2018 up 1.2 per cent year-on-year, after a 4.9 per cent gain in 2017.

“Dwelling values in Australia are seeing slower growth or outright decline as a result of past value increases, which have exceeded income and rental growth, past supply increases, and actual or expected increases in borrowing costs,” Alaistair Chan, Housing Economist with Moody’s Analytics, said.

“That said, the worst is over, as less housing supply and Australia’s strengthening economy will support income and rental growth, and thus dwelling values, beginning next year,” added Mr Chan.

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