I’m sure you will all be very pleased to hear that speculation about house prices here in Australia, just as it is in England, is a very popular pastime indeed. There is much ongoing chatter and I did list some of the scary headlines I found in Google in my recent article UK and Australia: The House Price Debate.
Well, here we are about five weeks later and the headlines keep on coming and the chatter about house prices appears to be intensifying.
Most headlines talk about the unaffordability of housing in Sydney and Melbourne, saying that those two cities are without doubt in a bubble and that bubble is soon to burst. Earlier this month HSBC produced a report showing that house prices in Australia had risen by 24% in the last three years. Sydney and Melbourne accounted for the biggest rises at 39% and 22% respectively and that the rest of the country’s rises were more manageable 10% over the same three year period. Source: SMH
So Sydney and Melbourne certainly seem to have a problem which most observers feel can only end in tears.
In the news today though, analysts BIS Shrapnel have released a report detailing how they see house prices performing over the next three years between now until 2018. BIS Shrapnel have been in business 50 years, are highly respected and, best of all, they are fully independent.
Let’s have a look at what they had to say.
Residential Property Prospects 2015 – 2018
Let’s go through all of Australia’s capital cities, one by one.
- Prices are expected to slow over the next 12 months with just 7% growth
- Then fall for the next two years by around 4% up to June 2018
- Adjusting these figures for inflation, in real terms that equates to a 6% fall over the next three years
- Prices are expected to rise by around 5% over the next 12 months
- Then contract over the following two years
- In real terms a 4% fall is anticipated over the three-year period
- Brisbane prices are quite affordable by comparison, so it’s Australia’s only capital city where growth is anticipated
- The city is tipped for 13% rises over the next three years
- The Gold Coast and Sunshine Coast should be similar at 13% and 12%
- Prices have already declined over the last 12 months
- It is anticipated that prices will decline 10% over the next three years
- Prices will then level out
- Net overseas migration inflow is easing
- Housing supply in this city is too high at the moment
- Prices are expected to drop around 7% over the next three years
- Another city with an oversupply of housing at present
- Incomes in this city are high so affordability is not as strained
- Prices expected to stay flat, in real terms that’s a 5% decline over three years
- Another city expected to suffer from property oversupply
- Although this could be negated by interstate migration from NSW and Victoria
- Prices expected to rise 4% over the next three years, equivalent to a 4% fall when adjusted for inflation
- Investment in the resources sector appears to have peaked
- House prices are expected to suffer
- Prices forecast to fall by 2% over three years, that’s a 10% decline adjusted for inflation
The full 130 page plus report is available from BIS Shrapnel for a mere $1320; I decided against purchasing one at this stage. Luckily I could get my information online and if you visit news.com.au you will be able to read more about this report as well.
Call that a crash?
I know these are only predictions, but if they turn out to be true then this doesn’t really constitute a property crash as far as I can see. In the UK when we had a property bubble burst in the 1990s, inflation adjusted house prices fell by 37% over seven years. Source: The Economist
Now that’s what I call a price crash.
Three years ago I had a long-running debate with one of my readers through the comments here, he was convinced Australia was headed for a price crash, I wasn’t. I suggested we agree to disagree on the matter saying “We will just have to wait and see.”
He thought that was a bit of a copout, but that’s the thing with the future. As far as I’m aware, we don’t yet have a machine or device that can accurately predict what’s going to happen next, so…
We will just have to wait and see.
But according to BIS Shrapnel, things aren’t as bad as many are suggesting.