House prices in Sydney and Melbourne are forecast to tumble 8 per cent by 2021, wiping thousands of dollars off home values.
That 8 per cent plunge equates to nearly $80,000 in value for Sydney homes and $59,940 for Melbourne homes insights manager at comparison service, Finder.com.au, Graham Cooke said.
In fact, finder.com.au’s panel of experts and economists predict a downturn across all major Australian cities.
“With the highest median house price in the country, it’s not surprising that Sydney is expected to be hit hardest by the housing downturn,” Cooke said.
“If the predictions hold true, nearly $80,000 will be knocked off the average house value by the end of 2021.
“While this makes it harder for existing homeowners to build up equity, it could make Sydney an attractive market for first time buyers who have a deposit saved.”
He suggested first home buyers hold out until prices drop further and use that time to boost their deposit.
He explained, “Right now, there’s no need to jump on the first suitable property you see – you should be looking for value before you lay down the cash. Waiting a few years could potentially save you thousands of dollars.”
But structural market issues pose another roadblock
Waiting for prices to fall might not be enough, thanks to a “chronic undersupply” of suitable housing.
Coupled with poor population spread the dip in prices won’t last for long, the CEO of property research group, RiskWise, Doron Peleg warned.
“While development in middle-ring suburbs has increased in recent years, especially in Sydney, today’s record levels of housing construction are the bare minimum needed to meet the elevated level of population growth in the two major capital cities.”
He noted that first home buyers now make up 18.1 per cent of buyers, compared to 13.2 per cent in July 2016.
Nevertheless, without a coordinated strategy across all levels of government, this figure could slide backwards.
“Governments should also be encouraged to increase land supply release and development through co-ordinated strategy and targets,” he said.
“While land supply in Sydney and to a lesser extent Melbourne is limited in the inner and middle-rings, there is a certain level of supply in surrounding suburbs. Much of this greenfield development in Melbourne is less than 30 kilometres from the CBD; in Sydney it tends to be more than 40 kilometres from the CBD.
“Land releases in the outer suburbs are essential, particularly in Sydney to support the other supply-related measures that have been detailed above. The outer suburbs are significantly more affordable, and they provide an opportunity to first home buyers to enter the property market.”