Hurrah! In some very welcome news, economists are predicting property prices in Sydney and Melbourne to fall while national prices will flatten off this year. Experts say prices could fall by up to 15% in the capitals in the next two years, but that it’s too early to tell if this downward trend will be long term.
A new survey by comparison site Finder found that the near future was looking grim for homeowners.
“Our panel was predicting 10% or higher growth towards the end of last year on average and now they are forecasting 2%,” says Graham Cooke, Finder’s head of consumer research.
“Even if prices don’t increase significantly, rate rises from lenders will make home loans more expensive. [Loan increases] will cost a homeowner on these loans $3,175 extra this year — and that’s before any official cash rate rise.”
Domain’s Chief of Research and Economics, Dr Nicola Powell, says the price drop is, in part, due to buyers having more choice, which has diluted the buyer pool and competition between buyers.
“Buyers are a lot more cautious this year,” Dr Powell says. “Firstly, around not compromising — whereas this time last year, buyers were really fearful of missing out on securing a home. That’s gone. Now they’re being able to make much more rational decisions in a better timeframe.”
With more listings on the market and therefore greater choice, time is on buyers’ side, says Dr Powell. She says other reasons for the property price drop are a dip in clearance rates — from roughly 80% last year to 60% — and the number of views per listing reducing. In other words, less people are looking at the same listing.
As for other areas of Australia, namely southeast Queensland, which includes Brisbane, and regional NSW, economists are only predicting a flattening of prices – and not a drop – for a number of reasons.
“We’re seeing strong levels of demand in southeast Queensland, particularly from interstate,” says Dr Powell. “There is this affordability conversation driving these trends. Affordability’s always been a constraint for Sydney buyers and we’ve seen a flow of people leaving Sydney and moving into regional NSW and southeast Queensland. That was accelerated by the pandemic because it disrupted the way we worked and allowed more people to work from home.”
So, bottom line, what does this all mean for buyers? Should we or shouldn’t we look to buy now? Well, it depends on where you’re buying and your circumstances, says Dr Powell.
“If you’re a homeowner already, if you buy and sell close together, the timing of the market doesn’t really matter for you — if you’re selling a home and buying a home under the same market conditions,” she says.
“For first home buyers, it becomes a little more complex. It depends upon your savings pool – whether your savings can keep up with the price growth we’re seeing. But buying opportunities have certainly improved. We’re seeing more new listings. We’re seeing prices now start to ease in our major capital cities. So, it really depends on the circumstance.”