Sydney house price falls set to continue for rest of 2018

Housing demand is falling at a time of increased housing supply. Picture: Jonathan Ng

SYDNEY’S housing slump is expected to end by mid-2019, new projections have revealed.

The modelling from CoreLogic-Moody’s Analytics released today showed house values were forecast to drop 5.1 per cent over 2018 before rising 0.6 per cent over 2019.

Apartment values were expected to fall 0.2 per cent for the calendar year, but grow 1.8 per cent over 2019.

Both house and unit values would then grow by about 3 per cent in 2020, the report said.

Sydney’s long pipeline of infrastructure upgrades would fuel much of the rebound in values by encouraging more population growth and boosting incomes.

But that impact would take some time to filter into the housing sector.

This meant current weakness in the market would continue and prices would fall for the rest of 2018, Moody’s Analytics said.

Apartment values have not been falling as fast as house values, despite a greater supply of newly constructed units.

The primary force driving down prices was weakening demand from property buyers at a time of rising housing supply.

Developers were releasing a slew of new units and houses, but fewer buyers could purchase them because of banks restricting access to home loans.

Many buyers were also no longer able to afford vendor’s inflated asking prices, especially for houses, which cost an average of nearly 60 per cent more than in 2013.

This was despite a 5.6 per cent fall in Sydney’s median home price since September 2017.

The Moody’s Analytics report said Sydney housing was “overvalued” relative to household incomes, which have remained largely stagnant in recent years.

The report added that home prices were more overvalued in certain pickets of the city and price falls would not be spread evenly across Sydney’s geographic regions or housing categories.

Detached house values in the CBD area were forecast to fall 9.4 per cent this year, while on the northern beaches the fall would be 5.6 per cent.

The Hills area would have the biggest fall with unit price drops of 13.1 per cent and house price falls of 6.6 per cent. A slowdown was also expected in Western Sydney. Values in Blacktown were forecast to drop 5.8 per cent in 2018.

Most new housing supply has een built in Sydney’s outer areas.

House values in the inner west were expected to decline 9.2 per cent, while unit values would drop 2.1 per cent.

The Central Coast would defy the slowdown with house value growth of 3.6 per cent and unit value growth of 2.4 per cent.

SQM Research director Louis Christopher said prices were currently as overvalued as they were in 2003 when the market went through its biggest correction of the past 20 years.

“The current market is similar to how it was to 2003,” Mr Christopher said.

“Values fell considerably more back then (before increasing again) and that would suggest current prices would have to drop a lot more than they currently have before growth would return.”

BIGGEST FORECAST FALLS IN PRICES 2018

HOUSES

Sydney CBD -9.4%

Inner west -9.2%

Ryde -7.6%

The Hills -6.6%

North shore -6.1%

UNITS

The Hills -13.1%

Sutherland -4.3%

North shore -2.9%

Inner west -2.1%