Property values are set to cool, not collapse in 2018: Moody's Analytics
Recent small monthly falls in the Sydney and Melbourne markets support Moody Analytics' expectation for cooling, rather than a slump, in the near term.
Its latest report forecasts Australia’s housing market is expected to cool further over 2018, given the coming stream of apartment supply coupled with continued restrictions on lending from the nation’s financial regulator, the Australian Prudential Regulation Authority.
It noted several factors are at play, including aggressive regulatory action that has included limits on new bank lending exposure to the local housing market, higher borrowing costs especially for investors who tend to carry higher leverage, and improved enforcement of existing legal limits on foreign ownership have started to bear fruit.
It suggests if the housing market looks to be on a sharper than expected cooling trend that materially threatens the broader economy given the outsize exposure of consumers and lenders to local property, there was "little doubt regulators would step in to try to restore order, at the very least by winding back some regulatory limits."
The latest Moody's Analytics CoreLogic Hedonic Home Value Index results show a divergent national market.
Declines in the biggest markets, Melbourne and Sydney, pushed down housing values in aggregate in April for a sixth consecutive month.
But markets in Adelaide, Darwin, Canberra and Hobart continue to improve, while markets in Brisbane and Perth were flat.
After a 12.8% rise in 2017, house values across Sydney are forecast to decline nearly 5% in 2018 before a recovery in 2019.
Apartment values in Sydney are likely to retain their value and gain 0.6% in 2018, thanks in part to healthy demand.
Houses values in Melbourne are forecast to increase 1.5% in 2018, although some declines are forecast for Inner Melbourne. Melbourne’s apartment market is expected to hold up and gain 4.3% in 2018.
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House values across Brisbane are forecast to see a mild 1.4% gain in 2018, with strength in West Brisbane and Inner Brisbane offsetting declines in South Brisbane.
Brisbane’s apartment values are tipped to rise 0.8% this year, driven by recovery in East Brisbane apartment values. Apartments in Inner Brisbane are still expected to see mild declines.
House values in Perth will see another year of decline, with a 0.5% decline forecast for this year before a 2.2% recovery in 2019, driven by the steadily recovering local economy.
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Meanwhile, Adelaide’s housing market will continue its unremarkable run, albeit at a moderating pace.
House values in Adelaide are forecast to rise 1.2% in 2018, after a 4.9% gain in 2017. Canberra’s housing market will similarly see a slowdown, with values forecast to rise 4% in 2018 after an 8.7% gain in 2017.
Sydney's biggest drops are predicted to be in Ryde and the inner city and south areas.
In Melbourne it's the inner south values that are going to take a hit, while Brisbane has seen off the worst of its price falls.