Growth in Sydney home prices will lag other cities next year, including Hobart and Melbourne.
Slump in Sydney housing market to last until mid-2018: SQM
19 Oct 2017
SYDNEY house hunters may have more time to nab a better deal — the current lull in the market is expected to continue into the first half of next year, with prices forecast to only begin rising again in late 2018.
A Housing Boom and Bust Report by SQM Research has forecast Sydney’s median home price will finish this year at about 6-8 per cent higher than it was at the end of 2016.
The median will then increase 4-8 per cent over 2018, largely due to growth in the second half of the year.
2018 would thus be a reversal of 2017, when the strongest price movements were at the start of the year and lacklustre conditions set in over winter and spring.
SQM Research director Louis Christopher said banks’ restrictive lending policies to investors were driving the current slowdown and would determine whether prices grew again in 2018.
“Sydney will record a soft market in the first half of (2018), but property prices will start to recover in the second half as the banks will likely increase investment lending once again,” Mr Christopher said.
An aerial view of Hobart, which will record a boom in prices over 2018, according to SQM Research.
“There have been reports of banks investment lending ratios being under the maximum thresholds allowed, so we can expect a rise next year as banks increase investment lending up to this limit.”
“I expect by this time next year we will see a spike in buyer activity and ease on lending criteria as banks want to maintain their market share,” he said.
The current “hiatus” in price growth meant it was the perfect time to buy into the market, Mr Elbanna said. “Astute investors know this and are taking action,” he said.
Booming market conditions will continue in Melbourne.
Growth of about 4-8 per cent next year would be well below the levels recorded over 2015 and 2016, when Sydney’s median home price jumped 11.5 per cent and 15.5 per cent, respectively.
It would also result in Sydney growth falling well below levels expected for other capitals, particularly Hobart, which is expected to lead the country with growth of 8-13 per cent next year.
Melbourne prices would have the second fastest growth, lifting by an average of 7-12 per cent.
Brisbane values would go up 3-7 per cent, Canberra’s by 5-9 per cent and Adelaide’s by 0-4 per cent, SQM’s modelling showed.
With home prices well above $2 million in many suburbs, Sydney may not have as much room for further price growth as other capitals.
A severe drop in Sydney home prices was unlikely, Mr Christopher said.
“Accelerated population growth rates in Melbourne and Sydney have enabled the cities to avoid severe property downturns,” he said.
Despite the cooling in the Sydney housing market, many house hunters would still struggle to get into the market, Mr Christopher added.
“Housing affordability will likely continue to deteriorate in 2018 with growth in property prices still outpacing wages growth,” he said.