Sydney’s hot property market will soon see values falling by about 5%, according to BIS Oxford Economics.
Robert Mellor, the managing director, presented his annual forecasts at the company’s biannual conference in Sydney.
He is expecting a decline in Sydney of up to 5% between June 2017 and June 2019 for the detached housing market.
And those who bought apartments off the plan may see falls of 10% more.
Mellor expects “modest corrections” rather than a property bust in Sydney.
Sydney home prices hit a 18.4% annual price growth last month, the highest rate since 2002, and have risen 75% in less than five years, according to research firm CoreLogic.
The housing boom has come at a cost, with household debt soaring and housing affordability falling.
The OECD (Organisation for Economic Co-operation and Development) last week named housing as the biggest threat to Australia’s economy.
BIS Oxford Economics, formerly called BIS Shrapnel, is expecting the median house price in Sydney to reach $1.2 million.
This means a price fall from June would lead to a $60,000 to $70,000 drop in the median price, leaving prices still higher than they were six months ago.
“Prices since 1996 have risen by a factor of five times,” says Mellor.
On affordability, Mellor says it’s “pretty tough” for people under 35 to get into the market.
The number of first home buyers is down 40% in the past five years compared to the previous five. And Mellor expects a further fall.
“It will be difficult for governments to change policies to try and affect it,” he says.
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