Lots of residential property analysts are calling the end of the market decline. Now one has made a bold prediction: prices will rise by at least 5 per cent next year.
Macquarie Securities has taken the measure of the market and forecast that prices are likely to fall another 1 or 2 per cent in coming months, then it expects prices to stop falling over the next few months.
It says likely lower interest rates, easier lending standards and a more settled post-election environment “should see national house prices rise by at least 5 per cent by the end of 2020”.
Movements of as much as 10 per cent in Sydney and Melbourne “wouldn’t surprise us”, it says.
The government’s first home buyer deposit scheme should also provide “some modest support”, Macquarie says.
Another factor is the relative shortage of new home listings in recent months. Sellers have kept properties off the market amid falling prices.
Lower borrowing rates are likely to be the most powerful factor. “We assume the RBA cuts by 50 basis points in coming months and most of that is passed through to actual mortgage rates,” Macquarie says.
APRA wrote to lenders last month, saying that instead of the 7 per cent floor (which is 7.25 per cent in practice), they would be permitted to review and set their own minimum interest rate floor for use in assessments.
Macquarie says: “Support for house price growth from APRA’s rule change will be dampened by the fact that most borrowers don’t borrow the maximum loan amount available to them.
“Nevertheless, we are conscious that housing process are determined at the margin and the effect of APRA’s changes on the marginal borrower shouldn’t be underestimated.”
The decline from the mid-2017 peak to the trough looks like being 10 per cent nationally, with Sydney’s peak to trough fall to be around 15 to 20 per cent and Melbourne’s close to 15 per cent.
If the peak-to-trough fall is 10 per cent it will be the biggest housing market fall in 40 years.
CoreLogic says there has been an improvement in the rate of decline. In April, Sydney dwelling values were down 0.7 per cent, compared with a fall of 1.8 per cent last December.
After the April data was released, CoreLogic head of research Tim Lawless said: “While none of the indicators could be described as strong, the current trend in the data implies that housing market conditions may have moved through the worst of the downturn.”
According to figures prepared by Hometrack Australia, Sydney dwelling prices were unchanged in May and Melbourne prices were down just 0.2 per cent.