Domain predicts property market could stabilise in 2019

After a year of significant property price falls across the country we could see the market start to stabilise as early as next year before moving into a new growth phase, according to new research from Domain Group.

Domain’s Property Price Forecast report looked at the likely scenario of capital city prices over the next two years. It factored in population growth, interest rates, bank lending, unemployment rates and market sentiment.

Based on this information it’s predicted that house prices in Sydney and Melbourne will continue to fall in the first half of 2019. After this it is likely that prices will stabilise and enter a new growth phase.

According to the report, “2019 looks likely to be a year of greater stability”.

“That’s not to say prices won’t fall further, but the pace of those falls will slow in the first half of 2019 before we move into another moderate growth phase,” the report’s author Domain analyst Trent Wiltshire noted.

“We expect that Sydney and Melbourne will be two of the weakest markets in 2019 and then forecast prices to grow at about 4 per cent in 2020.”

Tighter lending conditions are believed to be a major contributor to price declines, according to the report, but as borrowers adjust to the “new normal”, mortgage lending may start to grow again, albeit at a slower pace.

“Tighter lending conditions have weighed heavily on Sydney property prices, particularly for more expensive properties, but we think this is likely to have played out by mid-2019,” Wiltshire said.

Other factors that will help prop up the property market include strong population growth, lower unemployment, a pick-up in wage growth and increasing first-home buyer activity due to improved affordability.

Property market risks

While all indicators seem to point to the property market bottoming out soon, nothing is ever for certain.

Wiltshire warned that an incoming Labour government could lead to new policies and changes, which could see changes in buying activity.

Labor’s plans are to limit negative gearing to new properties and slash capital gains tax discounts on investments from 50 per cent to 25 per cent. This could push down prices.

Overall however, the outlook for the Australian property market looks positive, with the worst of the price falls in Sydney and Melbourne possibly soon to be behind us.

In the meantime it’s a great time for buyers to look at getting into the market to take advantage of current affordability.

To read the full Domain Property Price Forecasts report visit – https://www.domain.com.au/news/domains-property-price-forecasts.

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