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A leading economist has predicted unit prices in Sydney and Melbourne to lose up to 20 per cent of their value as areas become oversupplied.
AMP Capital chief economist Shane Oliver believes dwelling prices gains are expected to slow as the heat comes out of Sydney and Melbourne, which have led property price gains over the last 12 months.
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Mr Oliver said that an increased supply of apartments in these markets “is expected to drive 15 to 20 per cent price falls for units in oversupplied areas into 2018”.
Meanwhile, HSBC Australia has forecast prices to begin slowing across Australia from next year.
The group’s chief economist, Paul Bloxham, says Sydney and Melbourne continue to show solid house price growth, while Adelaide, Brisbane and Perth are much weaker.
“We expect the housing market to cool for a number of reasons,” Mr Bloxham said.
“First, prudential settings are expected to remain tight, weighing on housing loan approvals, which are already down from their 2015 peak levels. Second, there is a significant boost to apartment supply due over coming quarters, although this varies across the cities,” he said.
“Third, we expect a pull-back in foreign investor interest, largely due to the fall in the RMB/AUD, making Australian housing more expensive for Chinese buyers and, thereby, weakening foreign demand.”
While detached house prices are expected to grow between 4 and 6 per cent in Sydney and 2 and 4 per cent in Melbourne, HSBC expects apartment prices to drop in both capital cities.
Mr Bloxham said the bank expects the oversupply in the apartment market, particularly in Melbourne, is likely to start showing through in price falls of up to 6 per cent next year.
“We doubt that oversupply in the apartment market will have much effect on the detached house market, given the lack of substitutability. Like Sydney, tighter prudential settings and a pull-back in foreign demand are expected to weigh on prices, particularly of apartments,” he said.
Mr Bloxham said Brisbane’s housing market is similar to Melbourne in some ways.
“We expect oversupply to weigh on apartment prices (-4 per cent to 0 per cent), but we see a limited effect on the detached house market, partly due to the lack of substitutability,” he said.
“A key difference for the Brisbane market, when compared with Melbourne, is that housing price growth has been far more limited than in Melbourne, which could limit the scope for significant price falls.”
[Related: Triguboff pushed 'go' on $1bn pipeline of new apartments]
