Is Aussie property bouncing back? Here’s where house prices are really headed next

Property investors and first-home buyer hopefuls can rejoice: the property downturn looks set to be well and truly over by the end of 2019.

New figures from economic researcher Moody’s Analytics has forecasted property price growth across every Australian capital city next year, except Hobart.

Moody’s national index for home values has fallen for almost two years, but Sydney, Melbourne, Brisbane, Perth, Adelaide, Darwin and Canberra will all see a steady recovery in 2020, according to the Moody’s Analytics report.

House prices in Australia’s two biggest cities, Sydney and Melbourne, are forecast to grow a modest 3.1 per cent and 1.3 per cent respectively.

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It will be a much-needed recovery, with Moody predicting the total home value falls in Sydney and Melbourne housing markets to be -9.6 per cent and -10.8 per cent this year.

Where Hobart was once Australia’s property darling, the property market in the Apple Isle is projected to drop in 2020 and 2021.

Here’s a look at how each state will perform:

New South Wales

House values across Sydney are set for a 3.1 per cent increase next year and a further 4.8 per cent in 2021, with apartment prices to rise slightly higher at 4 and 6 per cent in 2020 and 2021 respectively.

“As income growth and home values converge at a similar pace, a slowdown in house and apartment values is expected,” Moody’s said.

“The correction in Sydney is forecast to have largely passed by 2020, but home value growth will be far from the lofty gains of recent years.”

Sydney’s eastern and northern suburbs are set for “an entrenched slump”, while areas outside of metro Sydney, such as the Hunter Valley, have become attractive for their transport links.

Victoria

Following a projected 10.8 per cent fall for 2019, Melbourne will see a 1.3 per cent upswing next year, followed by a healthier 6 per cent in 2021.

“By early 2020, house values across most of Greater Melbourne are forecast to experience a return to month-on-month growth,” said Moody’s.

“Overall, Greater Melbourne house values are expected to tick up 1.3% in 2020, with Melbourne-Inner East and Melbourne-North East leading the recovery.”

Regional Victoria home values are also expected to “continue holding up relatively well” over the coming months, set to rise 3.3 per cent next year and then a 1.5 per cent gain in 2021.

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Queensland

The Queensland housing market is faring relatively better than other states but is still forecast to fall by -1.8 per cent this year, with 1.4 per cent house price growth predicted for next year and 2.9 per cent for 2021.

“The Brisbane area … is experiencing weaker-than-expected outcomes,” said the report.

“The outlook for these housing markets is for either flat or mildly positive returns over the forecast period.”

In the medium term, apartment prices are expected to do better than house prices.

“We forecast home values to underperform throughout the forecast period, while apartment values are expected to reach a trough in 2018-2019 followed by a pronounced recovery in 2020.”

Western Australia

Where prices in Perth’s housing market is expected to fall by -6.9 per cent this year, we’re set to see a 2.1 per cent increase next year and then a further 4.3 growth in 2021, according to Moody’s report.

“The housing market is expected to continue declining in 2019, with a trough not likely until 2020.”

“But relief is around the corner, with a modest recovery predicted to commence in 2020 before it ramps up in 2021.”

Economic factors in WA are “slowly improving”, with the RBA’s non-rural commodity price rising, alongside stabilising population growth and a coming reduction in housing supply.

“All these factors, combined with the recent RBA interest rate cuts, will likely enable a return to growth for both house and apartment values in 2020 and then firming the following year.”

South Australia

After a modest projected fall in house values of 0.4 per cent this year, Adelaide’s housing market is expected to rebound by 2.7 per cent next year and 3.6 per cent in 2021.

“South Australia’s housing market remains stable thanks largely to its avoidance of the excess runup in values that has occurred on the eastern seaboard.”

Adelaide’s North and South areas will “remain the nascent housing markets”, with Adelaide North to remain “robust despite slow gains”, according to Moody’s.

“A recent stabilisation in rents will buttress home and apartment values through the outlook period.”

Tasmania

Bucking the trend, Tasmania’s housing market was the only shining star in Australian property in 2018 and early 2019 – until recent months, where we saw a “slowdown in growth”.

But “a correction is forecast for 2020 and 2021,” said Moody’s, with price growth forecast at -1.6 per cent and -0.7 per cent respectively.

The expected deceleration will come from a lack of job growth, which is contributing to “relatively low” wage growth that will then strain household balance sheets.

Northern Territory

“Moody’s Analytics expects ACT home values to fare relatively well in 2019, with house values forecast to rise around 4 per cent, following the 5.4 per cent gain in 2018.

“Next year is expected to be a stronger year for both the house and unit markets, with house values forecast to rise 5.6 per cent, while a 4.2 per cent increase is projected for unit values.”

Where Darwin’s housing prices have been weak since 2014, we’ll see an upswing in the coming two years of 4.9 per cent in 2020 and 7.7 per cent in 2021, Moody’s indicated.

“A solid recovery is still expected by as early as next year. Darwin did not benefit from the extraordinary value gains the other states had until around 2017, particularly in New South Wales and Victoria,” said the report.

“So its base was relatively low and had been falling for many years already.”

Darwin house prices and apartment prices have been revised higher for 2020 and 2021, boosted by the RBA’s recent cash rate cut and expectations of further easing, according to Moody’s.

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