2018 was a tough year for some sections of the property market. Melbourne and Sydney experienced the brunt of price cooling during the year. Here, we look at the experts’ opinions on if we can expect more price drops in 2019.
In 2018, two of Australia’s powerhouse cities finally experienced some price cooling.
After years of unabated growth, both Sydney and Melbourne entered periods of decline.
Sydney actually experienced its largest price falls for three decades. And the effects were such that they dragged the overall market too.
It was a chaotic year for investors. There were still plenty of opportunities to take advantage of. But these declines created uncertainty that left investors worrying about their next moves.
But now, it’s time to look to the future.
What does 2019 have to offer us?
Will we see further declines in line with what we saw in 2018? Will the markets in Sydney and Melbourne rebound?
Those are the questions we aim to answer here. In this article, we’ve compiled the opinions of some of the leading Australian property market experts.
Prediction #1 – The National Market May Turn a Corner in 2019
Domain is one of the leading authorities in the Australian property market. They publish several reports every year and are a great source of data.
And we can look to their 2018 Property Price Forecast report to see their prediction.
The report looks at a host of factors to predict where the market will go. These include things like population migration, unemployment rates, and lending.
These are all key drivers.
In its analysis of the report, Domain says: “The most likely scenario – according to our forecasts – is that Australian house prices will keep falling in the first half of 2019 before turning around and growing modestly.”
They go on to predict a 1% increase in national values in 2019, with a 4% increase to follow in 2020.
However, they also predict that median prices will drop to $760,000 by the middle of 2019. This will put them right back to where they were in 2016.
The first part of this prediction lines up with what the Commonwealth Bank of Australia (CBA) says.
Their senior economist, Gareth Aird, says: “The evidence suggests that dwelling prices will continue to deflate in the very near term.”
But Aird does say that we’ll see a lot of variance between cities and suburbs. That means there’s investment potential even if the declines continue.
Aird also doesn’t say how long he thinks the declines will last.
Prediction #2 – Sydney May Stabilise
The same Domain report suggests that Sydney’s decline will also slow during 2019.
This is important news as Sydney was the key driver for the national property price decline of 2018.
Property expert Michael Yardley’s analysis of the report says: “Domain forecast that Sydney house prices will be close to unchanged in the year to December 2019 after falling by about 8 percent in 2018.”
“They then expect prices to grow modestly in 2020,” he concludes.”
Michael also notes that units may be the more stable investment in the city right now. This is especially the case thanks to the New South Wales’ government’s stamp duty concessions.
Prediction #3 – American Tariffs Against China May Cause Issues
ManageCasa is a property management software solution provider. They have a less optimistic opinion on what may happen with the market.
Interestingly, they think that forces outside of Australia’s control may have a larger effect than we realise.
They say: “The housing markets are clearly headed for retraction in 2019/2020. The stubbornness of US President Trump’s “America First Policy” and tariffs against China <are issues>. The ripple effects will take their toll on the Australian economy in the years ahead.”
ManageCase points out that a lack of Chinese investment could cause issues for the market. Tariffs against China could affect Australia’s trade relationship with the country. And this, in turn, could have an effect on the economy.
A struggling economy means lower demand, which could result in prices falling further.
This is a speculative prediction. It relies on the current state of global affairs remaining as they are for the next year.
Still, it’s an interesting prediction that’s worth taking into account.
Prediction #4 – Three Capitals Will Outperform The Others in 2019
Simon Pressley is the Managing Director and Head of Research at Propertyology. They conduct regular research into the property market.
Pressley predicts that Melbourne and Sydney will continue to struggle in 2019. But that doesn’t mean that opportunities don’t exist elsewhere.
According to Pressley: “Adelaide, Brisbane and (again) Hobart will be Australia’s best-performed capital city markets in 2019.”
He goes on to say that he sees Perth making a recovery and perhaps becoming the best-performing capital of 2020.
Pressley’s opinions are pretty clear. If you’re looking to invest in a capital city in 2019, there are only three you should choose from.
In fact, Pressley even says that he wouldn’t touch an investment property in Sydney with a 10-foot barge pole right now.
Prediction #5 – The Election May Play a Role
Nerida Conisbee is the Chief Economist at realestate.com.au. They provide research and information for both buyers and sellers.
Conisbee says that political factors may play a role in how the 2019 market shapes up. Specifically, she says that a Labor victory in the election could spark some changes.
“It is very hard to predict, with the election increasingly looking like a Labor Party win, we will get political stability but there could be changes to negative gearing and capital gains.”
She doesn’t go into detail about what those changes might be. However, the Labor Party has promised to make the negative gearing issue a key focus if it’s elected.
That means it might become harder for investors to use this as a strategy.
Conisbee says that it’s not all bad news though.
“The royal commission could be more positive than anticipated as the likely restrictions aren’t as bad as the ones that are already self-imposed.”
This suggests that the lending market won’t undergo any extreme tightening due to regulations during 2019.
Prediction #6 – Interest Rates Will Remain Flat
Bushy Martin is the author of The Freedom Formula.
He believes that investors won’t have to worry about changing interest rates.
“Interest rates will remain flat, and we may even see the RBA drop rates,” he says.
But he adds that “finance will remain hard to get.”
That last point suggests that you’ll still have to deal with tight lending criteria, even if interest rates stay the same. This is despite the fact that the APRA has relaxed its caps on investment lending.
Still, a stable interest rate means investors can make better cash flow predictions.
The key thing to remember here is that these are all predictions. Each comes from an expert in the property industry and they’re backed by solid data.
But they aren’t guarantees.
It’s likely that the market’s going to face continued uncertainty in 2019 as it adjusts to the declines of 2018. We may see Sydney stabilise and it’s likely there’ll be a slight rebound on the national level.
But it’s also possible that external factors could influence the direction that the market takes.
Wealth for Life wants to help you to navigate all of these hurdles.
We can help you to build an investment strategy that takes all of these predictions into account. And best of all, you’ll be working with investors who’ve been there, done it, and are actively dealing with the market as we speak.
Do you want to learn more?
Schedule your one-on-one appointment with a Wealth for Life team member today.