Analysts are suggesting that this year will see Victorian property prices peak before they fall by 6 per cent or more in the subsequent four years, with an oversupply of apartments dragging the market down.
Ratings agency Moody’s and research house CoreLogic have conducted analysis of the Australian residential property market and the results show the situation is far from stable.
Moody’s analysts found that after several years of strong rises, prices were likely to fall from next year until 2020.
The CoreLogic Moody’s report found that the nation’s house prices rose by 7.2 per cent when comparing the past three months to the same period a year ago.
The greatest rises were in Melbourne (10.4 per cent) and Sydney (8.4 per cent) during the quarter, and these drove the overall increase despite falls in other cities.
Markets experiencing price falls included Darwin (2.8 per cent), Perth (1.7 per cent), and the regional markets in Western Australia and South Australia which were down 6.2 per cent and 1.3 per cent respectively.
There was likely to be only a “small fillip” to house value growth as a result of the Reserve Bank’s rate cut last month, Moody’s said. It’s expected that national growth across 2016 will be smaller than the first-quarter increase, and the property market is therefore predicted to lose ground during the remainder of the year.
“House values nationwide are expected to rise 6 per cent this year and 4.1 per cent in 2017,” the ratings agency said.
“Much of this rise will be driven by continued gains in Sydney, where values are forecast to rise 7.3 per cent this year — about half the 14.9 per cent rise in 2015.
“Meanwhile Melbourne’s market is nearing a peak and could be entering a slump because of high incoming supply.”
Melbourne prices are projected to finish 7.1 per cent up for the year, which would indicate an imminent price fall after this quarter’s 10.4 per cent rise.
A fall of 0.2 per cent is expected for Melbourne next year, with greater drops to follow.
It’s predicted that regional Victorian prices will finish the year up 0.3 per cent but will then fall 1 per cent in 2017. “The effects of high levels of incoming supply, (with) 200,000 dwellings approved for construction from 2013 to 2015, will depress (Melbourne) house values through to 2020,” Moody’s said.
“Despite expectations of steady income and jobs growth in Melbourne, house values are forecast to decline more than 6 per cent from the end of 2016 through to early 2020.”
The bulk of the declines will show through in the apartment market, the ratings agency said.