House prices could fall by 15% in three capitals: Louis Christopher
House prices in Brisbane, Melbourne and Darwin could fall by as much as 15% from their recent peak by the end of 2012 even if interest rates stay unchanged, according to property analyst SQM’s Louis Christopher.
Only Sydney and Canberra will escape the plunge, Christopher says.
Battered buyer confidence, the four interest rate rises in 2010 and a reluctance to take on more debt would force the house price falls.
“We are well on the way to these type of declines,” Christopher says.
“We have over 377,000 properties on the market … there’s a lot of stock on the market coming into this spring, and we’re not expecting buyer demand to pick up at all,” he says.
SQM Research’s first national outlook report, entitled Christopher’s Housing Boom and Bust Report, details that Perth was likely to record the largest drop in house prices and Canberra the least.
He suggests Sydney property prices are expected to do relatively better than prices in other cities.
“But for Brisbane, Perth, Melbourne and Darwin, the losses are mounting, having come off recent strong runs.
“In 2012 if there is a 25 basis point cut in official cash rates, prices would likely bottom out and even post modest gains in some cities, as the property downturn eases and confidence begins to return to the market.
“However if rates are left on hold, house prices are likely to keep falling well into 2012 with no market bottom until at least the middle of the year,” Christopher says.
“If rates we to rise by just 25 points, either this year or next, house price declines would accelerate throughout the course of the year.
“Our base case scenario is that interest rates are unlikely to change in the immediate future.
“If interest rates do remain unchanged through to June 2012, then the accumulated peak-to-trough declines for most Australian capital cities will reach double digits by the end of that calendar year.
“It’s clear to us that this current housing downturn is starting to build some momentum, which is going to be very difficult to stop without some kind of stimulus from either the RBA or the federal government,” Christopher says.
Median House Price Forecasts | ||||||
City | % change from Peak to June 2011 | 2011F* | 2012F | 2012F | 2012F | Accumulated change. Peak to end 2012. No rate change (base case) |
-4.3% | -5% to -7% | -2 to -4% | 4% to 0% | -5% to -8% | -10% to -14% | |
-3.6% | -4% to 6% | -4% to -7% | +3% to -2% | -5% to -7% | -10% to -15% | |
-3.1% | -5% to -8% | -4% to 7% | +3% to -2% | -5% to -9% | -9% to -15% | |
-2.0% | -5% to -7% | -5% to -7% | +2% to -2% | -5% to -9% | -11% to -15% | |
-0.6% | 0% to -4% | +4% to +0% | +7% to +2% | -3% to -5% | +3% to -3% | |
-2.4% | -4% to -6% | -4%-6% | +5% to 0% | -4% to -8% | -8% to -12% | |
-0.7% (Dec 2010) | -2% to -4.5% | -2% to -4% | +5% to +2% | -4% to -7% | -4% to -8% | |
Peak now | +1% to -1% | +2% to +4% | +8% to +2% | -3% to -5% | +5% to +1% | |
The full report is available at SQM's website.
