‘Meaningful’ housing recovery still a ‘way off’

In its Residential Property Prospects 2019-2022 report, BIS Oxford Economics has stated that recent reductions in interest rates and the easing of mortgage serviceability standards would help stabilise the housing market this year and trigger some price growth in 2020.

However, BIS Oxford expects an oversupply of housing, the continued crackdown on living expenses for credit applications, subdued wages growth, and weakening economic conditions to stunt any “meaningful” price growth over the coming years, adding that a spike in values is still “a way off”.  

BIS Oxford associate director and study author Angie Zigomanis made particular note of the oversupply of dwellings, which he said continues to exceed demand.

“Supply is running at record levels, with new dwelling completions having exceeded 200,000 in each of the past four years and expected to have peaked at a record of just under 227,000 dwellings in 2018-19,” Mr Zigomanis said.

“This compares with underlying demand for new dwellings averaging around 195,000 per annum in the same period, which in itself is a record.”

BIS Oxford has forecasted that median house prices will remain below their peak in four of the major capital cities over the next three years.

According to the analysis, median house prices will remain 14 per cent below peak in Darwin, 13 per cent below peak in Sydney, and 10 per cent below peak in both Melbourne and Perth as at June 2022.

In contrast, prices are forecast to rise by up to 17 per cent above peak in Brisbane, 11 per cent above peak in Adelaide, 9 per cent above peak in Canberra, and 4 per cent above peak in Hobart over the next three years.

BIS Oxford expects Brisbane to experience the sharpest price growth in the three years to June 2022 (20 per cent), followed by Adelaide (11 per cent), Canberra (10 per cent), Darin, Melbourne and Perth (7 per cent, respectively), Sydney (6 per cent) and Hobart (4 per cent).

BIS Oxford’s study follows the release of CoreLogic’s latest Hedonic Home Value Index, which reported that national dwelling values fell 0.2 per cent in June.

However, prices increased in Sydney (0.1 per cent) and Melbourne (0.2 per cent) for the first time since their prices peaked in July 2018 and November 2017, respectively.

Like BIS Oxford, CoreLogic observed that while “the tide may have turned” in the housing market, it does not expect a “rapid recovery”.  

[Related: Housing affordability comparable to 1999 levels]