Abbas Valadkhani of Swinburne University, Ronald Ratti from the University of Western Sydney and Greg Costello from Curtin University analysed monthly house data from 1995 to the end of 2014 and used their results to extrapolate what they think house prices in Australia will do over the next 12 months.
According to their research, next 12 months will see Melbourne’s houses hit with a 9.2% decrease, while Sydney houses prices will rise by 6% to the end of the 2015 before plateauing.
The analysis predicts prices in Brisbane will fall by 8.1% over the next year, while Perth will see a fall of 5.2%.
Prices in Adelaide, Hobart and Canberra will continue to climb at a slow rate.
While Dr Valadkhani told Fairfax media outlets that the trio’s modelling was predicting the general directions that prices would follow, a number of economists believe their predictions are off-base.
Domain Group senior economist Dr Andrew Wilson told the Sydney Morning Herald there is no historical data that points to the decline the trio have predicted for Melbourne.
“If Melbourne falls at the level predicted it would be unprecedented in the modern era," Dr Wilson said.
"There is clearly no case for a historical sharp decline – Melbourne house prices are still 50 per cent lower than Sydney with incomes at similar levels.”
AMP Capital chief economist Shane Oliver also told the Sydney Morning Herald the predicted price movements seemed unlikely.
“I fail to see why one city would go in a radically different direction than the other, given they aren't far apart and are in fairly similar cycles," Dr Oliver said.
"There's nothing to say Melbourne prices will take a tumble.
"Historically falls are based on interest rates rising, which isn't likely to happen in the next couple of years."
