QBE: Sydney's house prices are about to go flat

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The housing boom is near the end of its run for Sydney, according to QBE’s latest Housing Outlook report prepared by analysts BIS Shrapnel.

The 2016-19 forecasts show tighter lending to investors slowing demand and softening the Australian residential property market over the next three years, improving affordability and creating opportunities for owner occupiers.

Nationally, slowing rental and price growth is likely to contain investor appetite for residential property.

The recent tightening in bank lending to overseas investors will also slow overall demand.

“Prices are forecast to soften through the three years to 2019, which is likely to be positive for housing affordability,” says QBE Lenders’ Mortgage Insurance chief executive Phil White.

“It’s expected owner occupiers, including first home buyers, will be stepping in to pick up some of this opportunity in the market.”

Here’s how investment loans have fallen:

In Sydney, the hot spot of the housing boom, prices are tipped to be flat from 2016 to June 2019, while units are forecast to fall 6.8%.

Sydney’s median house price, which increased 58% in the four years to June this year to hit $1.047 million, is forecast to rise by 1.7% to $1.065 million by mid-2017 before falling to $1.055 million in 2018 and $1.050 million in 2019.

The apartment market has already started to slide.

The median unit price, which rose by an estimated 41% in the four years to June, grew by just 3% in 2015-16.

Sydney’s unit price growth is forecast to fall 1.8% in 2016-17 and cumulatively by 6.8% during the three years to June 2019 to a median price of $680,000.

Melbourne house and unit prices are forecast to decline, with units expected to fall by a total of 9% to June 2019, according to the report. House prices are expected to fall marginally by 0.6% over the three years.

Brisbane is forecast to have the highest house price growth of the three largest capital cities, 6.5% to $560,000 by June 2019. However, Brisbane unit prices are expected to fall by 8.2% over the same time.

The Perth market will weaken for both houses and units as mining investment shrinks. The median house price will hit $540,000 in June 2019, about 10% below its December 2014 peak and 24% below the March 2007 high during the first mining boom.

The median unit price was down by 6.5% to June this year with further declines totalling 6% forecast in 2016-17 and 2017-18.

The median house price in Adelaide is forecast for limited growth of around 0.9% in 2017-8 and an overall decline of 1.3% by June 2019. Adelaide’s apartment market is expected to remain relatively flat.

Hobart’s median house price will rise by around 4% a year, or at a cumulative rate of 12.5% by June 2019. The median unit price growth is expected to between 1% and 2% a year to 2018-19.

In Canberra, the median house price will rise by 3.5% in 2016-17 with further growth of 2.4% and 2.3% in the two years to June 2019. The median unit price is expected to slide by 4% in 2016-17 and 2018-19.

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