House price falls “across the board” ahead

Adam Smith 11 July 2016

house values downOversupply and low population growth weaken the market.

BIS Shrapnel’s Residential Property Prospects, 2016 to 2019 report has claimed low population growth and a surge in dwelling completions will see most undersupplied markets across the nation head into oversupply in 2016 and 2017, while already oversupplied markets are likely to remain so. The company predicted that this oversupply was likely to see median house and unit prices in all capital city markets fall by 2019.

While Sydney and Melbourne have driven much of the house price growth over recent years, BIS Shrapnel senior manager Angie Zigomanis said the rate of growth in the cities was slowing while a boom in apartment construction created a “disconnect” between supply and demand.

“In fact, nearly all capital cities are building apartments at record rates on the back of the recent strength in investor demand. As these projects are progressively completed, it is likely that there will not be enough tenants in a number of cities to support rents and consequently values upon completion,” he said.

Zigomanis said regulatory guidelines from APRA which have seen banks tighten their lending policies toward investors are likely to serve as further headwinds.

“In New South Wales and Victoria in particular, where the strength of investor demand has been a key driver of the Sydney and Melbourne residential markets respectively, the decline in investor activity has slowed the pace of price growth. As investor expectations of capital gains are reduced, investor demand is expected to weaken further, creating additional downward pressure on prices,” Zigomanis said.

BIS Shrapnel forecast the best prospects for median house price growth over the coming three years are likely to be in Brisbane, Hobart and Canberra. Perth, Darwin and Adelaide are expected to see continued weakness.

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