$ 60,000 Property Price Fall Projected for 2020



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Before today's interest rate decisions, all sides are slashing home prices in Sydney, which are heading for an additional $ 60K by 2020, with Melbourne at its heels with a $ 50K drop.

These numbers are the expected result of an additional 8% drop in prices, according to the Finder's RBA Rate Survey.

While median home prices in Sydney currently stand at $ 930,000, a fall forecast of 6.21% would take the new median to $ 872,242 – down nearly $ 60,000.

The Melbourne real estate crisis is now officially the worst ever recorded

CoreLogic numbers, released today, show that home prices in Sydney have already experienced a 10.6% annual drop, followed by Melbourne with 9.8%.

Prices in Sydney are back to what they were in 2016. Melbourne is back in August 2017.

Only Hobart, Canberra, and Adelaide have escaped the gravitational pull of tighter borrowing standards, and a general sense that the music has stopped, but even those cities saw prices fall or even begin to fall in the last quarter.

As house prices rise, so does consumer spending in what is known as the wealth effect. But a similar thing is true on the downward slope, with the latest numbers of weak ABS consumer spending.

This is leading market economist Stephen Koukoulas to suggest that the central bank will drop the official cash rate on Tuesday.

We know that the economy is weakening, we just saw CoreLogic numbers, "Koukoulas said.

"Another price drop, we know this has an impact on consumer spending."

He said that even if the RBA did not cut rates tomorrow, the issue was more when and if not.

"How fragile the economy will be before leaving," he said.

"If you look at GDP figures, the last two quarters were very weak last year."

RELATED: Recession per capita hits Australian economy

LESS PRICES DO NOT RESTART THE BAR

Koukoulas told News.com.au that he thought that even if the RBA cut rates, it would not bring back the boom that saw home prices see price changes of 10 to 20 percent a year.

"A rate cut will do more to help cash flows, there is more entrenched softening in the housing," he said.

"If we see that the housing was suddenly increasing, then the RBA should raise rates."

But REA chief economist Nerida Conisbee said past experience has shown that any rate cut is associated with an increase in people who want to buy.

"We will not see the real estate bubble rekindled, but we will see an increase in activity," Conisbee said.

"The correlation between rates and clicks (by buyers on the REA website) is very high and we know that people looking for housing respond positively to a rate cut."

AMP Capital chief economist and investment strategy director Shane Oliver told News.com.au that a cut in the interest rate would not likely raise prices.

"I suspected this would not inflate a real estate boom like in 2011," Oliver said.

"The debt of families is much higher, so you may not see the same momentum in the last two times the rates were cut."

Oliver recently revised his previous forecast of a 20% drop for a 25% drop.

REA uses different pricing measures for homes than CoreLogic. They show price declines, but not as marked as CoreLogic.

Ms Conisbee said it was clear that prices had a way to go, but that things were "looking more positive now than six months ago." She said that the direction of the market depends on the outcome of the election.

CoreLogic's chief research officer, Tim Lawless, said that any cut in the rate is unlikely to increase borrowing, given the higher rates at which many borrowers were assessed.

"Even if you can get a mortgage of about 4% or even less, lenders will still assess accessibility by 7% or more," Lawless said.

"It is a major hurdle for many borrowers, in addition to raising a deposit."

Lawless said the crash in Sydney and Melbourne was sharper than expected and what areas previously considered safe were beginning to feel tight.

"Adelaide has turned the corner, showing negative movements in the last three months that Hobart and Canberra have slowed down, that's the effect of tighter credit," he said.

"The higher end of the market is showing a larger drop in values ​​than at affordable prices."

NEW GOOD BOOM PRICE FOR NOBODY

Many experts agree that a return to a period of extreme price jumps would be bad for Australia, but price declines also had their cost.

"It is the change that matters, the price increase helped to support the economy, people felt richer than the change," said Koukoulas.

"More significant than that, people who made loans at the top or who adjusted their spending patterns because their house was $ 1 million, but now worth $ 875,000, impact the sentiment."

Ms Conisbee said that stability in the market is what we need.

The message that is reported is that strong growth is good and declines are bad and there are always winners and losers in both situations, "she said.

"It does not matter to anyone when it increases 10% a year."

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