Sydney and Melbourne dwelling prices are forecast to drive the nation's housing market bounce back next year.
SQM Research tips Sydney could rise between 10 to 14 per cent and Melbourne 11 to 15 per cent over 2020.
The latest Housing Boom and Bust Report expects most of Australia’s capital cities to record dwelling price rises over next year, as a result of the RBA’s interest rate cuts, a relaxing of credit restrictions and Australia's ongoing strong population growth rate.
“These factors are expected to drive the national housing market into 2020,” SQM managing director Louis Christopher said.
Latest ANZ and Corelogic research shows housing affordability peaked in June, with forecasts property prices could reach record highs in the first half of 2020 if they continue at current rates.
National dwelling values were 6.5 times higher than gross annual household incomes in June, the lowest level since December 2013, according to ANZ and Corelogic.
Christopher’s housing report notes the base case forecast is for Australia’s dwelling prices to rise between 7 per cent to 11 per cent.
“Which is a strong bounce back from the price falls recorded over 2018 and the first half of 2019,” the report notes.
|CITY||12-months to 31 Oct-2019: All dwellings||2020: Base-Case||2020 Scenario 2||Scenario 3||Scenario 4|
|Perth||-8.7%||3%-to-6%||4% to 7%||3% to 6%||-6% to -2%|
|Brisbane||-1.1 %||3% to 6%||4% to 7%||3% to 6%||-3% to 1 %|
|Darwin||-9.2 %||-5% to -2%||-4% to -1%||-5% to -2%||-7 % to -3%|
|Melbourne||-1%||11% to 15%||12% to 17%||5% to 9%||0 to 4%|
|Sydney||-2.5%||10% to 14%||11% to 16%||4 % to 8%||0 to 4%|
|Adelaide||-0.9%||1% to 4%||1% to 4%||1% to 4%||-2% to 2%|
|Hobart||2.6%||5% to 8%||6% to 9%||4% to 7%||3% to 6%|
|Canberra||2%||3% to 7%||4% to 8%||2% to 5%||4% to 7%|
|Capital City Average (weighted)||-2.5%||7% to 11%||8% to 13%||4% to 7 %||-1% to 3 %|
^ Base Case: Cash rate unchanged at 0.75%. Economy recovering. AUD ranges between US$0.65–US$0.75 NO APRA Intervention until late 2020 at the earliest.
Scenario 2: RBA cuts to 0.50% by April 2020. Trade wars tentatively stabilised. Economy stable. No APRA intervention
Scenario 3: Same as Scenario One, however: APRA intervention occurs mid-2020.
Scenario 4: Trade talks collapse. Economy weakening. RBA cuts cash rate to zero by end 2020.
SQM’s base case forecasts assume no changes in interest rates and no intervention by the Australian Prudential Regulation Authority.
It also assumes a recovering Australian economy that has responded to this year’s rate cuts along with reduced international trade tensions.
“The Sydney and Melbourne housing markets have recorded a sharp turnaround in the second half of 2019,” Christopher said.
But despite strong price rises forecast, Christopher expects APRA will not immediately intervene.
“However we have some misgivings on the sustainability of this new recovery,” he said.
“Sydney and Melbourne are rising from an overvalued point. Long term, our two largest housing markets look vulnerable and forever reliant on cheap credit.
“Housing debt, while falling compared to GDP over 2019, is still very high. Better value can definitely be found elsewhere such as Perth and Brisbane,” he said.
Following the downturn in Perth’s housing market SQM expects the recovery in the mining sector will see the Western Australian capital record dwelling price rises of between 3 to 6 per cent next year.
Brisbane is also expected to benefit from the recovery in mining investment, forecast to record price rises of between 3 to 6 per cent.