Property prices to hit floor in ‘coming months’

ANZ Research has updated its forecasts for the housing market, stating that it now expects dwelling values to “bottom out” in the coming months before returning to positive territory later this year.

According to the research group, its expectations have been revised in response to “policy easing and an associated lift in sentiment”, which it said have helped drive a sharp improvement in auction clearance rates.

“The change in sentiment has been driven by a combination of factors. The RBA has cut interest rates twice, the prudential regulator has eased loan assessment requirements, and the election result has delivered increased certainty around the taxation arrangements for housing,” ANZ Research noted.

“All of these factors have helped to shift sentiment from one of pervasive negativity to cautious optimism.”

ANZ Research also pointed to the latest CoreLogic data, which revealed that in June, residential dwelling values increased in Sydney and Melbourne for the first time since the downturn commenced, rising by 0.1 per cent and 0.2 per cent, respectively.

However, the research group reiterated that it does not expect a “V-shaped recovery” in the housing market, adding that the continued crackdown on living expenses for mortgage applications and an oversupply of housing in major markets would stunt price growth.

“This all suggests that the recovery is likely to be a fairly modest one,” ANZ Research added.

The group, therefore, has forecast price growth of around 3 per cent in 2020.

ANZ Research’s analysis follows the release of a report by BIS Oxford Economics, which noted that while growth is expected in the near term, prices would remain below peak in four of the major capitals for some time to come.

According to BIS Oxford, median house prices will remain 14 per cent below peak in Darwin, 13 per cent below peak in Sydney, and 10 per cent below peak in both Melbourne and Perth as at June 2022.

In contrast, prices are forecast to rise by up to 17 per cent above peak in Brisbane, 11 per cent above peak in Adelaide, 9 per cent above peak in Canberra and 4 per cent above peak in Hobart over the next three years.

BIS Oxford expects Brisbane to experience the sharpest price growth in the three years to June 2022 (20 per cent), followed by Adelaide (11 per cent), Canberra (10 per cent), Darwin, Melbourne and Perth (7 per cent, respectively), Sydney (6 per cent) and Hobart (4 per cent).

[Related: ‘Meaningful’ housing recovery still ‘a way off]