Sydney’s property market downturn looks likely to last at least another two years, as stricter lending standards and buyer nerves weigh on prices, according to economists recently surveyed by Bloomberg.
This prediction is shared by the majority of the 15 respondents, over a third of which have become more pessimistic within the past three months.
Prices across the country have declined for nine straight months as the housing boom dwindles. Sydney, which had been known for affordable values and significant investor influence, is being hit hardest – prices in the harbor city are down 4.5% from 2017, compared to 0.8% nationally.
“Sydney is at the epicentre of the housing market downturn,” said Stephen Roberts, an economist at Laminar Capital. “Much of the decline in house prices seems to be related to housing investors and the tightening of lending standards.”
Sydney’s slump is expected to get worse, with the median peak-to-trough price drop estimated at 10%. The country overall is expected to see a 5% decline.
“Still, the data conceals a considerable range of views: while three economists forecast falls of 15 percent in Sydney, two see decreases of less than 7%,” Bloomberg noted.
When asked how long they think it will take until home prices start to rise, only three of the 14 economists who gave a time frame believe prices in Sydney will begin to increase in less than two years.
The rest of the economists, meanwhile, predicted it would be at least two years before any price hikes and even then most suggested values would stay level after 2020 rather than rebound.
“Given regulators’ desire to see stability in the house price-to-income and debt-to-income ratios, we think it will be some time before house prices start to move again,” said Sally Auld, Chief Economist for Australia at JPMorgan Chase & Co.
In the end, the survey results indicated that credit availability is the biggest factor affecting the forecasts regarding home values.
Regulators have incrementally tightened measures on riskier loans, such as interest-only mortgages, while also carrying out stricter expense and debt verification for borrowers.
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