If you own an apartment, you could lose up to 8 per cent less of its value by the end of 2019.
Sydney apartment owners will be the worst hit, with a price drop of 8.44 per cent predicted over the next 13 months. That’s $59,906 cut from the average unit price, according to finder.com.au’s panel of 32 experts and economists.
In Melbourne, apartments are set to fall in value by an average $38,163, or 7.13 per cent, while apartments in Brisbane are set to fall in value by 4.42 per cent, or $17,998 by the end of 2019.
“Those in the market for an apartment face a much greater risk of losing equity compared to those buying a house, due to an oversupply of units in capital cities,” finder.com.au insight’s manager, Graham Cooke said.
“Property on the outskirts of cities will experience a much more significant drop than those in the CBD, as demand is generally not as strong in these areas.”
He said rentvestors, or people who own an investment property while renting in the location they want to live, are at the most risk, given apartments in lower-price areas have traditionally been hit hardest.
Is this as bad as it can get?
It depends who you ask.
Investment bank, Morgan Stanley considers Australia’s household debt to be among the most risky in the world and predicts property prices could fall as much as 10 to 15 per cent.
As it stands, our household debt to GDP is 120 per cent.
Then there’s Digital Finance Analytics’ principal, Martin North, who in September described Australian property as overvalued by more than 40 per cent.
However, he also predicts a 40 per cent fall in value is only a worst-case scenario, with a 20 per cent likelihood. Even if it were to occur, it would take around three years for the full effect to be seen.
The latest data from CoreLogic paints a similar but more restrained picture, with analyst Cameron Kusher noting Australian property values have fallen 3.5 per cent over the last 12 months.
However he added: “While home owners don’t like to see the value of their assets falling, to put this into perspective values are still 44.8 per cent higher over the past decade and 209.9 per cent higher over the past 20 years.”
It’s more extreme in Sydney, where prices have fallen 7.4 per cent over the year to October, meaning they’re 8.2 per cent lower than their July 2017 peak.
Apartments prices set to plummet another 8 per cent
Again, it depends on who you ask.
To finder’s Graham Cooke, those who have been saving a deposit will be in the “best position” to make the leap.
“If you’re in the market to buy now, look for value before you sign on the dotted line. It’s overwhelmingly a buyer’s market so use your bargaining power and don’t take the price guide at face value,” he said.
“As well as falling property prices, and therefore a smaller mortgage, first home buyers are spoilt for choice when it comes to home loans on offer, with historically low variable and fixed rates, alike, in market. Today, your rate should have a ‘3’ in front of it.”
However, CoreLogic’s Cameron Kusher argued Sydney and Melbourne’s declining values don’t offer any significant boon to first home buyers.
“In fact, in both cities values have only returned to levels seen a couple of years ago,” Kusher said.
“CoreLogic expects values to continue declining over the coming months however, it is unlikely that these falls will make any significant improvement to affordability, especially in the absence of real income growth.
“Although, if the declines continue for a number of years we could see a more substantial improvement in affordability as per what has occurred in Perth and Darwin following four years of ongoing value falls.”
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