Sydney's apartment price downtown to turnaround in 2019: Moody's Analytics

The downturn in Sydney’s housing market has been the most pronounced of any capital city in 2018 after it enjoyed the strongest runup in recent years, according to Moody's Analytics latest report

The report found that, house values were down by 7.8% year over year in November, and Moody’s Analytics forecasts further falls in 2019.

Average Sydney home values have fallen 10.1% since their most recent 2017 peak, overtaking the prior peak-to-trough fall of 9.6% notched from 1989 to 1991.

However home values in Sydney remain around 60% higher than they were in 2012.

Sydney and Melbourne contain approximately 40% of Australian homes and represent approximately 60% of Australia’s housing wealth.

Housing completions for metropolitan Sydney came in at a record high in the year to September, according to New South Wales Housing Monitor.

Meanwhile, building approvals for Greater Sydney were broadly flat against a year earlier, according to the ABS.

Westpac’s consumer sentiment survey suggests that households have adjusted to a new medium-term norm, with only 10% of respondents in the December survey indicating that real estate is the wisest place for savings, the lowest result since 1974.

The authors noted, "a high level of supply has now come on line for apartments in the inner city and surrounding areas as well as dwellings in suburban areas via land releases and removal of some development restrictions. This will contribute to the forecast slowdown in 2018 and 2019."

"House values in the City and Inner South area are forecast to fall further in 2019 following a sharp decline in 2018."

"The Inner West, which is expected to fall further in 2018, leads the way."

"The Eastern Suburbs and North Sydney are set for an entrenched slump; values are unlikely to recover before 2021," according to the report authors.

By 2020, the correction is forecast to have largely passed, but house value growth will be far from the lofty gains of recent years. Housing values are forecast to rise modestly in 2020. 

The report forecasts house values in the Central Coast will escape the correction that has engulfed much of Greater Sydney in 2018 and will rise modestly in 2019, building on a 12.5% gain in 2017.

Home values rose 13% in the Outer West and Blue Mountains in 2017, although the housing market has since cooled.