House prices set to fall even further this year

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House prices across Australia are expected to plunge even further this year as families continue to tighten their purse strings.

Ratings agency Moody’s Analytics has dramatically revised down its predictions for the nation’s property market as low wages growth begins to bite.

Moody’s forecasts that Sydney house prices will plummet by 9.3 per cent this year – a far bigger drop than the 3.3 per cent it predicted in January.

The outlook is even more grim for Melbourne, with Moody’s now predicting an 11.4 per cent fall in house prices, compared to a six per cent drop tipped in January.

According to the March CoreLogic Hedonic Home Value Index, the declines have been fuelled by cooling economic conditions.

“The Australian economy has had a great run. Last year marked the 27th year of recession-free growth, and it was solid,” the report, released today, said.

“But conditions have cooled. Labour market tightening has slowed, meaning that only modest improvements in wage growth continue.

House values have fallen by more than 9.3 per cent from their peak in 2017, Moody’s Analytics says. (Moody’s Analytics)

“Consumption has lost some steam, reduced by the entrenched slowing of the housing market, and the outlook is for the weakness to continue in 2019.

“GDP growth is forecast to slow to 2.5 per cent this year. Ultimately domestic demand is likely to be subdued in 2019.”

House values have fallen by nine per cent from their peak in 2017, compared with a six per cent drop for apartments, the ratings agency said.

Across Australia, house prices in Perth will likely decline by 7.6 per cent this year while Adelaide’s house values are forecast to rise by one per cent.

Apartment values are down 5.6 per cent from their 2017 peak, according to Moody’s Analytics. (Moody’s Analytics)

Moody’s said there was a risk prices could fall further, saying the financial services royal commission “could exacerbate already tightened lending conditions”.

“(This) could result in a further slowdown in credit availability, particularly in the investor portion

of the market. If this occurs, it could exacerbate the forecast correction in the property market and delay or weaken the forecast improvement in 2020,” the report said.

It comes as capital city auction volumes dipped at the start of the month.

Australia’s auction clearance rates have dipped this month. (AAP)

Property analyst group CoreLogic yesterday said 1,978 auctions were held across Australia’s combined capital cities in the week to Sunday, down 8.5 per cent from the final figure of 2,164 the week before.

The total number of Sydney auctions dipped from 801 to 740, and Melbourne’s total fell from 978 to 899.

The preliminary auction clearance rate was 57.2 per cent and, while it is expected to drop back in line with a three-week trend, CoreLogic said it will likely remain above 50 per cent.

For more information refer:

https://finance.nine.com.au/2019/04/09/14/11/property-prices-australia-moodys-analytics-declines-sydney-melbourne