Most Australians reckon home prices will be flat to lower over the next year

Gerardo Mora/Getty ImagesPessimism remains, especially in NSW.
  • Australia’s median home price has fallen 0.8% in the past year, according to data from CoreLogic.
  • A majority of consumers interviewed by Westpac Bank believe prices will be flat to lower over the next 12 months.
  • Pessimism is particularly acute in New South Wales, falling to levels not seen since the GFC.

Australian home prices have fallen over the past year, led by declines in the most expensive markets, Sydney and Melbourne.

Most Australians don’t expect that trend to change, according to data released by Westpac.

“As at July, over half of all consumers now expect prices to be unchanged or lower over the next year,” said Matthew Hassan, senior economist at Westpac, referring to analysis of responses in its latest Australian consumer sentiment survey for July.

“Of those consumers with a view, 43% now expect prices to rise over the next year, 28% expect no change and 29% expect falls.”

The house price expectations index — a component in Westpac’s monthly consumer sentiment report — has fallen 13.6% since April, hitting 112.5 in July, the lowest level since early 2016 and well below the series long-run average of 127.5.

“The weakness is over and above what is typically a downbeat time of year for housing market expectations,” Hassan says, noting sentiment has typically fallen by 3-4 percentage points on average during winter months across the country.

Combined, the “interpolated median” of all responses suggests home prices will remain flat over the next year.

One year ago, respondents expected prices to increase by 2.1%, higher than the 0.8% decline reported by CoreLogic in its Hove Value Index for June.


Given they are the locations where prices are falling the fastest at present, it came as no surprise that sentiment among respondents in New South Wales and Victoria were among the weakest in the country.

“The slide in expectations continues to be particularly sharp in New South Wales, the state index down 21% since April to 94 in July, the first sub-100 read since February 2016 and likely the weakest since the GFC,” Hassan says.

“Victoria has also seen sharp falls — down 17% since April — but at 107.8, expectations remain above the 100 line.”

A reading above 100 indicates that a majority of respondents expect prices to increase over the next 12 months.

Hassan put the divergence down to recent price trends in both states.

“The Sydney market has seen a more material price correction to date although the pace of declines has moderated a touch in 2018,” he says.

“In contrast, Melbourne’s correction has been milder but has tracked a similar pace to Sydney’s in 2018.”

As seen in the chart below, price expectations in Queensland have stabilised this year while those in Western Australia have softened, weighed down by continued price falls, especially in Perth.

Westpac Bank

While expectations for price growth over the next year continue to weaken in Australia’s most populous states, separate analysis from Macquarie Bank, using Westpac’s consumer sentiment data, suggests views on whether now is a good time to buy a dwelling have improved in both states recently, something it says has historically acted as a good leading indicator of changes in price momentum in the future.

On those grounds, perhaps peak pessimism towards the housing market may have already been seen.

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