Property markets in Sydney and Melbourne are anticipated to experience a slight decline in prices next year due to growing unaffordability and forced sales. SQM Research’s annual Housing Boom and Bust report suggests that the national average house price could decrease by one to three percent. However, there are a few cities that may buck this trend.
Perth and Brisbane are expected to see price increases, primarily driven by substantial Chinese demand for key commodities like iron ore. On the other hand, Sydney and Melbourne are likely to experience modest price falls. It is important to note that these decreases in property prices won’t be uniform throughout the cities.
According to SQM Research, the diminishing affordability of housing, characterized by ongoing interest rate hikes and what they describe as a “restrictive” situation, along with a potentially slower economy, will lead to a moderate correction in housing prices in Sydney, Melbourne, Canberra, and Hobart. Meanwhile, Adelaide and Darwin are projected to remain stable.
In Sydney, certain wealthier suburbs and inner-city areas are expected to maintain high property prices due to overseas demand. Nonetheless, the city as a whole could witness a drop of around four percent. In Melbourne, the decline is expected to be up to three percent. Canberra, on the other hand, may see a more significant drop of four to eight percent.
SQM Research Managing Director Louis Christopher states that despite an ongoing shortage of new dwellings and projected population growth, the fall in property prices will likely be limited to single-digit percentages. However, factors such as slowing employment growth and a subsequent rise in unemployment could outweigh the impact of migration and contribute to this decline.
Christopher also addresses the influence of interest rates, noting that they will continue to impact the property market in the coming year. He further emphasizes an expected surge in distressed selling activity, particularly in NSW, where signs of an upward trend in this area have already emerged.
1. What factors are expected to contribute to the decline in property prices in Sydney and Melbourne?
The anticipated decline in property prices in Sydney and Melbourne is driven by increasing unaffordability, forced sales, ongoing interest rate rises, and a potentially slower economy.
2. Which cities are expected to see price increases?
Perth and Brisbane are anticipated to experience price rises, primarily due to strong demand for base commodities such as iron ore from Chinese investors.
3. Will property prices fall uniformly across Sydney and Melbourne?
No, property prices are likely to remain high in wealthier suburbs and the inner city, driven by overseas demand. The overall decline in property prices will vary across different areas in these cities.
4. What other cities in Australia are projected to witness a correction in property prices?
Aside from Sydney and Melbourne, Canberra and Hobart are expected to experience a modest to moderate correction in dwelling prices. Adelaide and Darwin, however, are anticipated to remain stable.
5. How will interest rates impact the property market?
Interest rates are forecasted to continue influencing the property market in the coming year, potentially contributing to distress selling activity and further influencing property prices.