Aussie property prices to fall 10%

The AFR held its webcast on the property market, where the consensus seemed to be that Australian property prices would fall by around 10%:

“There are still risks including a second wave of coronavirus and there’s still going to be a lot of uncertainty,” [EY Oceania chief economist Jo Masters said].

“I think a 10 per cent fall in house prices is where the consensus is sitting, in my view.”

Last year the market needed about 180,000 new dwellings, next year it would be about 90,000. But there were 188,000 dwellings at the end of 2019, where construction had started but not been completed, Ms Masters said.

“That means we have dwellings in the pipeline coming through that’s double the underlying demand that we’re going to need.

“It’s pretty challenging conditions for the market having supply exceeding demand. Overall, I think it’s going to be a challenging couple of years”…

“I think we’re going to see further price weakness, particularly in Sydney and Melbourne. I do think that we will see them both down by the end of the year” [Domain senior analyst Nicola Powell said]…

“Sydney and Melbourne were being hurt by the loss of migration due to the border closure, that’s why they’re hit the hardest in many respects” [SQM Research managing director Louis Christopher said]…

A 10% property correction, driven by Sydney and Melbourne, looks realistic. The headwinds are obvious:

  • High unemployment and falling incomes, which could worsen once stimulus measures are unwound and/or if there are further shutdowns;
  • Collapsing immigration, which will mostly impact Sydney and Melbourne;
  • Rising rental vacancies and falling rents;
  • Tightening mortgage availability (despite low rates), as banks become increasingly concerned about borrowers’ ability to repay; and
  • Expiry of mortgage repayment holidays (coinciding with unwinding emergency income support) in late September.

How bad the downturn gets will depend largely on how successfully the government and banks withdraw emergency support.

Gradually unwinding support would obviously create less downside risks than opting for a hard stop,

Leith van Onselen
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Comments

    • I’m awaiting some new stimulus from Scotty:
      – RentSeeker – for landlords
      – AssetKeeper – for investment property owners, can double dip with RentSeeker
      – PeopleSeeker – the new name for the high immigration policy
      – CircuitBreaker – stop trading of any asset if prices fall, backed by RBA
      – SuperSeeker – use your super to pay your mortgage or rent

    • Yes indeed Scott Morrison is. He is confidant that unless there is a push in parliament, the banks are safe. They got the bail in provisions thru, deposits, all deposits can be taken if banks in trouble then any leftovers given back to depositors. The 250k guarantee is only IF the bank actually fails, it won’t because it will have taken deposits before failing. Second,y the 250K guarantee has to be activated by Govt, and that by choice after bank failure. G20 cooked it up.

  1. Goldstandard1MEMBER

    So there it is, finally a realistic (at least in direction) future prediction of house price declines from the AFR.
    So people living in la la land like Chris “I’m going bear hunting” Joye can finally be swept aside so a more realistic conversation can happen.

    Property dropped 12% last year on the back of “it’s flat” predictions so I’m thinking 10% turns into 20% no problems at all. From there, anything can happen because FOMO will be shot, and with bank credit tight and no immigration, that’s not rosey at all.

    • Narapoia451MEMBER

      Yeah, a bit of responsible lending generated 15% drops in Sydney in the previous downturn. The situation now is so much more dire, at least the AFR are moving in the right direction, but I can’t understand the mindset of people that would be choosing to buy right now.

      • Most prospective buyers are not informed. Who can they turn to for advice? The media, real estate agents, buyers “advocates”, banks, mortgage brokers etc. all who have a vested interest in having them make a purchase. It’s understandable why some people will want to buy now.

        • A friend of mine closed on a place near Newcastle today. His brother is a RE agent up there and they’re selling them almost as fast as they come in for listing, apparently. It’s insane.

    • Yes, interesting…..it’s all about getting the ‘great unwashed’ to accept a small decline in concept, with adequate reasoning, no panic, its all ok, type of narrative.
      Then just manage the MSM and reported numbers as we have already seen in previous articles about the ‘reporting’.
      Then, just keep saying that its only 10%….12% …..and look the sky hasn’t fallen, and the only way is up from here…..
      Then the numbers underneath with will largely be ‘undisclosed’, will be able to be ‘managed’. If they are 20%, then the powers that be will be able to still call it 12% with their stats.
      It will be an interesting next 6 months.

    • If it drops only 10% in a year we’ll essentially be looking at 5 years with zero capital growth, meaning on average every single negatively geared Ubermensch has been losing $ for 5 years in property.

  2. happy valleyMEMBER

    Price falls never going to happen under the collective watch of SFM, the rest of the LNP, the RBA, APRA, the private banksters and all the other happy clappy gang of mates?

  3. – Top quartile has already dropped 20% since Mar 2018 and 30% since Aug 2017 in Armadale, Melbourne.
    – Another 10%, as per AFR, would seem logical.

  4. Let’s remember that the credit rationing after the Hayne RC brought the market down 15%. Employment and economic growth was fine at the time

    The banks are now rationing credit using the V in LVR just as they did post-Hayne plus we’ve got every other bad factor lining up

    The weighting to the downside has perhaps never been stronger. You’d have to be a stroke victim to buy property now

    Spring-summer 2020-21 will be one for the history books

  5. Rorke's DriftMEMBER

    “I think a 10 per cent fall in house prices is where the consensus is sitting, in my view.” Jo Masters, EY economist.
    What a weak statement. In other words, I think that everybody else thinks it will fall 10% but if something else happens its their fault not mine!
    How do these people accept a salary, that they stand in the market as professionals who full time analyse the economy and that’s all she’s got to offer. What’s the point.
    We need more people in all professions who will take a view, right or wrong and stand by their opinion. Otherwise they’d be better off digging ditches or something and making a more worthwhile contribution to our society.

      • Rorke's DriftMEMBER

        Well you know I agree with your view bcnich and have posted on that and why, but my point was that any full time professional taking a salary for their opinions should have the guts to give one i.e. be more like you. Take a position and be damned!.

  6. The FallMEMBER

    I don’t see how it can’t be a lot lot more than 10%. International tourism gone indefinitely, higher education reamed, real unemployment somewhere between 10 and 20%. Until we actually achieve elimination of the virus in Australia domestic tourism and hospitality are on life support. No realistic hope of a widely administered effective vaccine for years. And a government run by happy-clappers who think that anyone in difficult financial circumstances hasn’t been praying hard enough just itching to start winding back support so they can get the budget back in surplus for reals this time in 2046.

    • Having just walked around the business hub of North Sydney for the first time in months. 50% of retail is shut. And about only 15% of the normal amount of people are there. There is no demand for anything. The joint is cooked. The house around the corner from me didn’t get a bid either. September will apocalyptic.

  7. mikef179MEMBER

    I’d say at least double whatever number they come up with.

    They are praying it’s only 10% now. A few months ago they were still projecting gains (albeit relatively small). Either they were that delusional or they were trying to project confidence into the market. Now they have gone from the “nothing to worry about” phase to the “it won’t be that bad” phase. It’s all downhill from here.

  8. Prices will rise over the next 12 months.

    Wasted 10 minutes writing all the reasons why before my comment was nuked.

    Government policies not even announced yet.
    Banks. Will reduce rates and lending standards over the next 12 months.
    Existing measures and policies (gov and banks) to be extended well into 2021.
    Im. m ig ration , for eign buyers.. incentivised. Border restrictions relaxed.

  9. Went to watch an auction in Cremone, Vic. 25 people there and not one person bid at starting price of $1m. Owners had bought it for $1m in 2016. Now it has a Sold sticker but no price listed online. Every bad sale is being hidden!

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