A buyer’s market: House prices to tumble in 2018, but two cities may buck the trend – June, 2018
- The cash rate pauses at 1.5% for June 2018
- House prices to fall across majority of capital cities, Brisbane to be hit the hardest with a dip of +6%
- Adelaide and Hobart identified as growth markets
5 June, 2018, Sydney, Australia – The cash rate was held today (05/06/2018) at the Reserve Bank’s fifth monetary policy meeting this year, while finder.com.au asked experts and economists to forecast how property prices will shift throughout the year.
In the June RBA cash rate survey, panellists were asked to gauge how housing prices will fluctuate this year, revealing a price drop in many capital city markets with a sharp fall of over 6% most likely for Brisbane.
For Sydney, predictions across the board were for housing prices to fall, with the largest group (43%) predicting a drop of 5-6% by the end of 2018. Only 7% of economists forecasted rising property prices in Sydney.
Melbourne was forecast for a less extreme price drop with 50% of experts and economists expecting values to dip between 3% and 4%.
Graham Cooke, Insights Manager at finder.com.au, says homebuyers may want to consider purchasing in a cooled market.
“For those mulling over buying their first property, this year could be a good time to snap up a bargain if prices do take a tumble.
“With some heat removed from the market, cheaper dwelling prices could be a first home buyer’s ticket into the property market.
“A cheaper price tag means they’ll have a smaller deposit, meaning they can jump onto the property ladder sooner,” he says.
The analysis shows Brisbane, Perth and Darwin housing prices are also tipped to fall this year, with no experts or economists indicating a rise in Darwin.
Brisbane housing price are most likely to plummet with 23% of respondents forecasting a fall of over 6%, which is the greatest predicted fall among the capital cities.
“This is also good news for those looking to buy in Brisbane, but things won’t be as peachy for sellers in the Sunshine State,” Mr Cooke says.
On the other hand, Adelaide and Hobart were identified as growth markets among the panel with 55% of respondents estimating 1-2% growth in Adelaide, while a combined 72% are forecasting Hobart prices to lift by 1-2% or 3-4%.
“The quieter cities of Adelaide and Hobart could be hot spots for investors wanting to unlock capital growth, or for homebuyers looking to put their property on the market,” he says.
|Rise over 6%||0%||0%||0%||0%||0%||0%||18%|
|Fall over 6%||14%||7%||23%||0%||8%||9%||0%|
source: finder.com.au survey of 15 leading economists and experts, May 2018.
Here’s what our experts had to say:
Jordan Eliseo, ABC Bullion: "The RBA will keep rates steady at their upcoming meeting, though we remain convinced the next move will be an interest rate cut. Local economic data remains soft at best, whilst fears over house price declines, and a more subdued environment for private sector credit growth continue to build, fuelled by some of the more troubling revelations from the Banking Royal Commission. The positive narrative around accelerating global growth is also starting to fade, with political uncertainty in Italy (and by extension Europe) unlikely to help."
Tim Nelson, AGL Energy: "Previous meeting indicated that there wasn't a strong case for near-term adjustment."
Shane Oliver, AMP Capital: "Basically nothing has changed. Signs of stronger investment, booming infrastructure spending, strong export volumes and the RBA’s own forecasts argue against a cut but uncertainty around consumer spending, the slowing Sydney and Melbourne property markets, tightening bank lending standards and the slowing Sydney and Melbourne property markets argue against a hike. So no case to move!"
Alison Booth, ANU: "Fundamentals haven’t yet changed sufficiently to warrant altering the interest-rate."
John Hewson, ANU: "No clear evidence to support a tightening especially given household debt."
Jonathan Chancellor, Property Observer: "The RBA won't be wanting to use its lever quite yet, as the economy is in a challenging state of transition. "
Malcolm Wood, Baillieu Holst: "Sluggish domestic economic data and inflation at the low end of the target range."
Paul Dales, Capital Economics: "Economic conditions are not strong enough to warrant higher rates and the RBA is becoming concerned that the Banking Royal Commission will result in some households and businesses finding it harder to get credit. The RBA won't want to raise the price of credit at the same time."
Saul Eslake, Corinna Economic Advisory: "Data releases since the last Board meeting are unlikely to have changed the Board's belief that it will be some time before spare capacity in the labour market has declined sufficiently, and economic growth picked up sufficiently, to warrant taking the first step back towards more 'normal' monetary policy settings."
Peter Gilmore, Gateway Bank Ltd: "Some of the fundamentals are beginning to show signs of lining up, but it's still too soon to move."
Mark Brimble, Griffith Uni: "Nothing has sufficiently changed."
Peter Haller, Heritage Bank: "Market conditions do not warrant a change. The RBA is comfortably on hold for the foreseeable future."
Shane Garrett, Housing Industry Association: "The economy is gathering pace in some areas without generating an increase in inflation - this means that no change in the RBA's cash rate is warranted for the moment."
Alex Joiner, IFM Investors: "There's been no shift in the economic outlook - this is particularly true in the labour market where spare capacity remains and therefore no meaningful acceleration of wages growth should be expected. In this way population growth remaining strong is a double-edged sword for the RBA in so far as it supports economic growth but keeps the unemployment rate from declining. Indeed the RBA does not expect full employment to be achieved over its forecast horizon."
Michael Witts, ING: "The RBA has indicated that rates will remain on hold for an extended period."
Leanne Pilkington, Laing+Simmons: "The housing market, from a number of key indicator perspectives, has peaked. Prices in select pockets are easing, clearance rates have dropped, and residential building approvals for April showed a 5% decline, which is more pronounced than most expected. So we’re seeing the market correct at the moment, but in a sustainable, soft-landing way. Raising interest rates prematurely could jeopardise this soft landing, so we expect the RBA to continue the hold pattern."
Mathew Tiller, LJ Hooker: "There has been no material change in indicators since last month. Property price growth continues to moderate which will be welcome by the RBA. Investor demand has eased with owner occupiers and first home buyers coming back into the market to fill the gap."
Stephen Koukoulas, Market Economics: "It remains the case that the RBA is downplaying the news of falling house prices, rising unemployment rate, weak wages and inflation. It should cut rates but it won't."
John Caelli, ME: "The RBA will want to see inflation and wages improve and lower unemployment before making any changes."
Michael Yardney, Metropole: "There's no reason to change rates. Jobs growth rebounded strongly last month but not enough to stop the jobless rate rising to a 9 month high of 5.6% keeping wages pressure low and rates won't rise until wages start growing."
Mark Crosby, Monash University: "The RBA is likely to remain on hold for the next few months unless wages growth and inflation strengthen. Moderation in asset price growth also lessens the probability of a rate rise."
Jacqueline Dearle, Mortgage Choice: "The RBA's decision to hold would be consistent with sustainable growth in the economy, home loan demand remaining stable, and achieving the inflation target over time."
Dr Andrew Wilson, My Housing Market: "Most recent relevant economic data continues to support steady rates and the Banks conservative stance on monetary policy. Rising spectre of a tariff enhanced-trade war however may require action to lower the AUD which would mean lower official rates.”
Alan Oster, NAB: "Watching for signs of better wages and labour market outcomes. Inflation still low."
Matthew Peter, QIC: "The rosy global economic backdrop is coming under pressure. Slowing growth momentum, Italian political chaos, uncertainty over Korea, and emerging-market instability in the face of rising interest rates and USD are eroding confidence in the global economy. Domestically, we have the Banking Royal Commission casting a shadow over credit growth. In the face of rising uncertainties, RBA will have not have to think twice before remaining on hold."
Noel Whittaker, QUT: "There is no compelling reason to increase them – and they certainly won't be reducing them."
Nerida Conisbee, REA Group: "The economy still isn't growing fast enough for the RBA to start moving rates upwards to slow it down."
Christine Williams, Smarter Property Investing: "Employment has stabilized. APRA's recommendations have been accepted and rolled out to all major funders."
Janu Chan, St.George Bank: "Low inflation, ongoing spare capacity, downside risks to housing and the household sector suggests RBA will remain on hold for some time.”
Clement Tisdell, UQ-School of Economics: "The statements of the bank."
Other participants: Bill Evans, Westpac.
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