Aussie property market winners and losers revealed

House price growth is expected to remain weak, or even decline, across Australian markets over the next year, as a combination of further tightening of lending to investors and rising new stock levels begin to drag on the residential market.

Banks have tightened the screws on investors, reducing their borrowing capacity while dwelling completions have seen markets tip into oversupply.

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As the Aussie property slowdown continues into the next financial year, BIS Oxford Economics’ new report has highlighted the areas which we can expect suburbs to perform the best and worst.

‘Rock star’ markets

The most recent rock star markets of Hobart and Canberra are expected to show the strongest price growth in 2018/19 according to the report.

Notably, there is a deficiency of dwellings in Hobart, which is expected to continue the momentum of recent price growth.

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In Canberra, price growth began to slow in 2017/18, although with the relatively high incomes in Canberra, there is likely to be further house price growth in 2018/19.

Nevertheless, price growth in these markets is likely to decelerate through to 2020/21 as new dwelling supply rises and affordability becomes more strained.

Elsewhere, price growth is forecast to be at or below inflation in most markets over the three years to 2020/21.

The greatest upside to house prices is expected to emerge in Brisbane, although it will not be immediate.

Net interstate migration flows into Queensland are steadily increasing.

There remains an oversupply of dwellings in the state, mainly in the apartment sector, although any recovery in the state is yet to gain traction.

This is forecast to keep any price rises modest in 2018/19 and 2019/20, with an acceleration in price growth expected to emerge the following year.

Slowing markets

The resource-focussed markets of Perth and Darwin have already experienced significant declines in prices, and it appears prices may have bottomed out, the report said.

However, any recovery in prices will be a slow grind, with excess stock, low population growth, and weak economic and employment growth to be worked through.

There is a similar story in Adelaide, with a subdued economic environment and limited population growth also having a dampening effect on prices.

House prices in Melbourne are forecast to tread water through to 2020/21, rising below the pace of inflation.

New supply continues to rise, and while it is mainly in the unit sector, it is likely to also impact the broader market. While owner occupier activity appears to be holding up, investor activity is weakening and this will play on purchaser demand and prices.

Sydney’s median house price is forecast to still be lower that its June 2017 peak by 2021.

The weaker investor demand is coinciding with rising supply and an erosion of the city’s dwelling deficiency, which has alleviated pressure on prices.

Although the market is expected to remain in undersupply, the drop in investor demand is expected to override the undersupply of dwellings, which in turn is forecast to result in modest price declines.