Stephen Koukoulas forecasts national house prices to begin small rise in late 2019

Short term weakness in 2019 house prices seems assured as the tight credit conditions and restrictive monetary policy settings constrain demand, according to economist Stephen Koukoulas.

"Nationwide prices may drop 5 per cent by the September quarter, with sharper falls likely in Sydney and Melbourne," he forecasts.

"Late 2019 will be the likely trough in house prices as easier monetary policy unfolds, there is a step up from previously frozen out first home buyers and the strength in demographic demand as fresh supply falters in line with the slippage in building approvals are all likely to put a floor under prices.

His call envisages a 5 per cent drop over first half of 2019 and then a 2 per cent rise in the second half.

"2020 might see a 3 per cent house price lift," he speculates.

He recently wrote on Yahoo Finance that if you are a home owner in Sydney, Melbourne, Perth or Darwin and if you have a superannuation nest egg, the odds are you are less wealthy today than you were a year or two ago.

He noted the Australian stock market, where the bulk of superannuation assets are likely to be invested, had slumped 11 per cent since August, reducing the value of stocks by around $200 billion. 

"At the same time, home owners in Sydney, Melbourne, Perth and Darwin are seeing the value of their homes getting crunched.

"Here are some examples. 

"A house in Sydney that was $1 million in July 2017 is now worth around $890,000, a loss of $110,000 in 18 months.

"In Melbourne, a house that was $800,000 in early 2018 has lost around $50,000 in value, to now be worth around $750,000.

"In Perth, the situation is more parlous. Prices have dropped 15 per cent since late 2014, meaning that a property that was $600,000 in 2014-15 has lost close to $100,000 in value to be worth just over $500,000.

"Ouch!"

He suggests as the loss of wealth filters through to more and more householders, or perhaps when they see the house around the corner not sell for months and when if finally does, the price is a shock, consumers will likely scale back their spending, rebuild savings and be generally cautious in their approach to spending in 2019.

"This will undermine growth in the economy."