According to Australia’s biggest lender, the Commonwealth Bank of Australia (CBA), the decline will continue for at least 18 months.
The number of property listings in Sydney and Melbourne, where the housing market is strongest, is growing and not expected to change over the next 18 months, the CBA told Business Insider.
Further, home loan lending seems to be reducing in line with stricter lending criteria and the listing price for homes is also beginning to dip. This is being seen in the larger housing markets of Sydney and Melbourne, with the trend expected to continue and spread to other capital cities.
Gareth Aird, Senior Economist at the CBA told Business Insider that, “The recent evidence suggests that Australia’s latest residential property short-run cycle has come to an end.”
“After a little over five years of incredibly strong property price growth, driven by Sydney and Melbourne, dwelling prices have been deflating,” he said. “It is our view that prices will to continue to deflate over the next 18 months.”
“We believe there is enough evidence to suggest that property prices are likely to head lower, particularly in Sydney and Melbourne.”Gareth Aird, Chief Economist, Commonwealth Bank of Australia
Sydney and Melbourne are expected to experience the biggest fall in pricing and overall impact on the housing market due to the two cities experiencing incredible growth in the last five years.
Whilst expected to continue dropping for at least the next two years, the downturn is not expected to reach alarming levels. “We do not expect a hard landing,” Aird suggests
“Population growth, driven by net immigration, is expected to remain strong. And rental growth is still positive, which ensures yields look reasonable in a low interest rate world,” he said.
“We also expect the unemployment rate to gradually drift lower, which means that the risk of default is low.”
With interest rates at an all-time low and Australians experiencing a mounting burden of debt, it is doubtful we will again experience the same growth in the market as seen in recent years.