Sydney’s housing downturn has become entrenched and will last until mid-2021 when prices will start to grow again, forecasts from KPMG have revealed.
The financial analytics firm predicted the total drop in prices for the entirety of the downturn, which started last year, would be 12.9 per cent.
Melbourne’s downturn would be less severe, with peak to trough falls tipped to be 4.5 per cent.
Sydney prices were forecast to fall at varying rates over the coming years, with drops of 4.3 per cent expected for the 2019 financial year, followed by a 1.3 per cent drop in the 2020 financial year.
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Growth of 3.5 per cent was expected in financial year 2021.
Drops in Sydney prices would be larger than in Melbourne because falling interest from investors would have more of an impact in NSW, according to KPMG.
Investors were behind nearly 60 per cent of NSW property purchases in 2016.
KPMG chief economist Brendan Rynne said tight lending policies have driven the declines in prices up until this point, adding that the tight lending standards may begin to ease up over the next few months.
The financial group predicted the Labor Party’s proposed reforms to negative gearing would have a short-lived impact on the availability of rental homes if the party won the election.
Mr Rynne said the introduction of these policies would need to be “managed carefully”.
Confidence in the Australian property industry has dropped to its lowest level in more than five years, according to an ANZ/Property Council survey.
“One of the big engines of the Australian economy is slowing, hit by tightening access to finance, softening forward work schedules and a less optimistic view of the economy,” Property Council CEO Ken Morrison said.
“It’s a message our political leaders need to heed, with the final report of the banking royal commission due in February, a state election in our most populous state and biggest property market (NSW) in March, and then a federal election in May.”
- news.com.au
