A rise in interest rates and an excess of property in the housing market is set to see prices fall in 2018 and remain deflated until 2021. The news comes following a report conducted by Moody's and the housing analyst firm CoreLogic.
Housing prices for detached properties are set to 5.6 per cent in 2017 before dropping by 0.6 per cent next year. 2019 will see prices slide a further 0.3 per cent before settling again in 2020 according to the Analytics Australian Home Value Index Forecast.
The primary cause of the trend has been identified as a sharp rise in interest rates as well as supply beginning to outstrip demand. The report states: "The major banks have increased lending rates out of step with the central bank. Some of this action is being driven by regulatory tightening and will encourage a slowdown in market activity this year and next."
It is reported that the major cities in Eastern Australia will weather the turbulence better seeing much smaller reductions in house prices over the coming years. It is suggested that if anything they will stagnate rather than fall.
Melbourne is poised to react to a sharp rise in detached housing supply. Prices for detached properties rocketed by 12.5 per cent in the year to January 2017. The report said: "Contrary to popular belief, the correction will likely be more severe in detached housing than apartments." Brisbane is set to buck the trend of the Australian market with prices recovering from early 2018 when property values in the rest of the country continue to fall.
The fall in prices is set to encourage many prospective first-time buyers to make their move onto the property ladder. While it might not be an ideal time to sell a property, for those looking to buy, their dollar will go much further.
