A major bank expects Melbourne to be Australia’s worst performing capital city property market this year, forecasting a 7 per cent drop in house prices.
NAB has comparatively tipped Sydney’s median house value to fall 5.6 per cent and Perth’s 0.2 per cent, Brisbane to remain unchanged, and Hobart and Adelaide to enjoy small rises.
NAB chief economist Alan Oster said Melbourne’s downturn was ultimately expected to mirror Sydney’s, with both cities to experience peak-to-trough declines of about 15 per cent.
With Sydney “a little bit further into the slowdown”, Melbourne simply had further to fall, he said.
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The median house value in Victoria’s capital skyrocketed 11.3 per cent in 2017, before falling hard in 2018 to shed 9.1 per cent, NAB’s new Australian Residential Property Survey shows.
Sydney saw more restrained 3.4 per cent gains in 2017 and a larger 10 per cent drop last year.
The bank expected both capitals’ downturns to continue in 2020, albeit at a much slower rate — a 2.2 per cent decline for Melbourne and 0.4 per cent for Sydney.
In the unit market, NAB has forecast 3.4 per cent and 1 per cent dips for Melbourne this year and next, following a 2.3 per cent fall last year.
Mr Oster said much of Melbourne’s price falls should be concentrated in the first half of 2019, with conditions set to flatten out in time for the spring selling season.
But he warned “further tightening in credit conditions and weaker price expectations in the investor market could likely further weigh on prices”.
Propertyology head of research Simon Pressley said the market’s performance would largely depend on “how soon we get back to sensible credit conditions”, adding he was “confident” that would occur soon.
The property research firm outlined a similar 2019 forecast for the Melbourne market earlier this month, tipping a 5-8 per cent fall in house and unit values combined if there are no changes to the lending conditions that helped drag prices down last year.
Propertyology said a return to “sensible credit policy” during the first quarter should ease the decline to 3 per cent at worst, and the same outcome in the second quarter, to a 4-7 per cent drop.
Mr Oster said the Melbourne market’s more affordable, first-home buyer heavy section had weathered the downturn much better than the top end, and he expected the same to occur this year.
NAB’s survey of more than 300 property professionals also found housing market sentiment had plummeted in Victoria — dubbed “a very poor result (that) was not unexpected given what’s been happening on house prices” by Mr Oster — but tipped big improvements in the state’s rental yields.