Property insiders: Prices and rents to plunge

The latest NAB survey of property professionals reveals a rather pessimistic industry, with sentiment collapsing both in the short and medium-term:

With Victoria most negatively impacted:

House price expectations have also tanked, with falls predicted over the next two years, with Victoria leading the declines:

The below charts give the longer-term context:

Rents are also expected to fall in 2020 but then rise modestly in 2021. However, Victoria is again expected to experience falls throughout:

The below charts give the longer-term context:

The view from NAB’s chief economist, Alan Oster, remains bearish, still tipping peak-to-trough price falls of between 10% and 15%, with Melbourne faring worst:

Our expectation for house prices over the next 18 months is broadly unchanged. We continue to expect house prices to decline by 10-15% in this episode.

While the impact of COVID-19 has not been as dramatic as first expected, prices appear to have now turned. This comes after very strong growth in Melbourne and Sydney over the past year or so.

Prices have declined in each of the past two months according to the CoreLogic 8-Capital City Index. Melbourne (which turned a month earlier), Perth and Sydney have seen the largest declines…

We expect the declines to be led by Sydney and Melbourne, but we also expect falls – albeit smaller – across the other capitals. Notably, Perth will again decline after having shown signs of stabilising. While all forecasts are highly uncertain at this point and will be heavily dependent on virus outcomes, it is unlikely any part of the country will escape a deterioration in the labour market and the resulting fallout for households.

Slower population growth – with lower international migration – as well as increased supply in the highrise segments will also weigh on prices, particularly in the larger centres. Low rates will be a general support but are likely to be offset by higher unemployment and weaker income growth. That said, we also anticipate a large fall in construction which will see a more rapid stabilisation in prices than otherwise. With approvals at low levels, it will take some time for construction to recover, so in the longer run the balance between recovering migration and the turn in construction will be important for prices…

Sounds about right.

Leith van Onselen
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Comments

  1. tripsterMEMBER

    It is the expectations for the ‘Next 2 years’ that I found the most interesting about these figures. It basically shows that those in the industry and those surveyed are expected a V shaped recovery. Once the expectations for the next 2 years are also crushed, things will get really interesting.

    • I don’t expect V-Shaped, but I also don’t expect -25%

      The drop in rates and hand-holding by regulatory bodies will help a LOT. In lieu of APRA playing very nice, this would have been a straight drop.
      Gotta love a free market…

      • No chance JJ
        If you are relying on regulators you will be sorely disappointed
        Interest rates will be higher when this whole ponzi circus implodes
        That area is aspiring, private school buyers in debt to the eyeballs trying to keep up with the Jones’s

        • Bcn, While I agree with many of your statements, I cant see how they can raise interest rates. I kno w from personal experience when the crash happened UK /euro area…they dropped rates from about 6% to .25%..That was in 2008…Im still paying 1% on my mortgage there…if they raise rates..its game over…I cant see how they would do it

  2. FWIW – I’m currently house hunting for PPOR. The prices in Ashburton/Ashwood/Mount Waverley are really taking a dive.
    What would have sold at $1.8m is now listed at $1.5m

    I’m not calling them ‘cheap’, as a house over 20km from the CBD for $1.5m is hardly cheap. But they’re cheaper…

    • My brother sold last year in G Iris on the very border of Ashburton for a price that was insane.
      I know the area very well.
      JJ, Glen Iris,Ashburton, Mt Waverly Glen Waverly will fall the most in Australia
      That $1.5M home will be under $1M in 12 months, I’d say lower
      It’s the most certain forecast I have written on this site ever.
      You wait……..

      He actually got divorced and was going to wait until this year. I told he and his wife, regardless of your differences sell in Q4 last year, Auction was October. Buyers were still going nuts

      You will buy in Malvern in 12 months to 2 years for the price you are willing to pay now

      Anyway that’s my strong personal opinion.

      • Glen Iris attracts some serious prices. A well renovated 3-4BR with a backyard is easily $2m.
        People will work a lifetime just to get the mortgage down to a manageable level.

        It seems the longer my mortgage pre-approval takes, the better off I am 😀

        FWIW – 50% LVR, with other assets double the size of the mortgage to use as security in addition to the house [they’re not interested in those]. Banks (NAB) still want to verify CF to the smallest detail. They pinged me because my YouTube premium subscription was $18.50, rather than the $15 a month I put down.

        Meanwhile, they’re treating the $5k a year on holidays and $2k on gifts I put down as completely discretionary, so it’s irrelevant.

        This process is so stupid.

        • AirtourerMEMBER

          John John – 23 Alfred St this weekend will be a good test. We’re also looking in the area… Won’t be bidding but the result will be a useful barometer.

          • You’re talking about 2/23 Alfred rd, Glen Iris, yeh? SOI says 1.15-1.25mill. Actually checked out 3/23 last year when it sold for 1.28m then (FYI 4/23 sold for 1.27m in mid-2015). 3/23 was decent inside but all still over-priced considering they’re beyond 10 min walk to the nearest station IMO. All are 3 bedders but the layouts definitely differ. 1/23 was on the market for a LONG time last year through to this year (I reckon it was around 4-6 months) and not sure if it ended up selling as there’s no record of sale yet. Hope it helps.

          • AirtourerMEMBER

            Thanks DS, Had gathered all that info and will be keen to see how it goes. We are in the market – I want to wait at least until the last 1/4 of the year, wife acknowledges the market will soften but counters that the sort of place we’re seeking (3, 2, 2 inner in the 1 – 1.5M market) is in demand from lots of people like us (mid 50s with large deposit) which will mitigate against significant falls. We shall see!

      • Those areas were driven by Chinese buying frenzy … If Chinese buyers go. So too will the prices in that area. I don’t see what’s so special about Glen Waverley personally..

        • Knuckles McGintyMEMBER

          We live in Glen Waverley (renting). Aside from the huge influx of Chinese money, it is the reputation of the local secondary school that has driven demand. You know you are living in a parallel universe when Year 12 students at school are driving up in cars that you can only dream about!

      • Wow. Thats dropped to only about 24x the median wage. Outer suburbs are pocket change at 8-10x. Either a real capitalistic or real socialist market for housing would solve this maddness. In fact the many forms of social housing in NW Europe provide a level of competition to the private ownership market.

        • Yep.
          I tend not to be a big-govt type person. But I have to admit that purely govt-supplied housing for all would be an improvement on the “market” we currently have.

  3. If house prices only fall 10 to 15% and rents higher in 2021, I’ll walk up and down Martin Place with sandwich board on me saying I’m Reusa’s Bich

    • PaperRooDogMEMBER

      You should be right however I suspect the powers that be will manage to control the rate of descent, so if the world does manage to recover in 2yrs it’ll only be a small drop. Brunt if a bit of deflation takes hold & stretches the downturn out (the more likely scenario, I think, especially for Aus) then yes we’ll fall to the snort of levels our non productive per capita recession economy deserves.

      • Paper
        When have regulators EVER done anything that works
        They’ll fck this up like they have every other time

    • I have always enjoyed your posts and hope you continue to post and are accurate in your predictions.

      I will however fly to Sydney to see you do the walk if you are wrong.

      • Steve Keen style. But can you do the walk outside Martin Place in full view of Captain Lowe?

    • billygoatMEMBER

      @bcn I’ll join the parade: but naked, all fours with dog collar. Reusa can have 2 bitche$ . Love it

  4. Remember its not a lie
    …..if you believe it
    and your wife is also relying on it.

  5. Reus's largeMEMBER

    Did you not see the spruik on 7 news last night about the 4 suburbs in Sydney that have seen price increases, boom times are back !

  6. Display NameMEMBER

    Fall 10-15% from what levels?

    The RE market is desperately trying to avoid price discovery. I suspect we are down 7-10% across the board now from 2019 highs. Possibly more.

    • ‘The RE market is desperately trying to avoid price discovery’
      And they’re doing a bloody good job of it!!

    • “The RE market is desperately trying to avoid price discovery. I suspect we are down 7-10% across the board now from 2019 highs. Possibly more.”

      In the very narrow range I’m looking at, I’m thinking about 15%. That said, there are anomalies because volumes are so low.

  7. I’ve done my own analysis of an outer east suburb in Melbourne making my own hedonic index. Price in that suburb are down approximately 7% from peak.

    • What happens to a debt deferred?
      Does it dry up
      like a raisin in the sun?
      Or fester like a sore—
      And then run?
      Does it stink like rotten meat?
      Or crust and sugar over—
      like a syrupy sweet?

      Maybe it just sags
      like a heavy load.

      Or does it explode?

    • why doesn’t the cafe owner sell the unit? why doesn’t the commercial real estate owner sell?
      how are they going to survive without the support they are receiving?

    • Shades of MessinaMEMBER

      How long until Super withdrawals for housing becomes the norm and not the exception in Australia ?.

      Been predicted by more than a few here on MB and would resonate with a large chunk of the voting population.

  8. nexus789MEMBER

    It’s a bit like a phony war at the moment until the dole support and defaults rise across the board.