Prices should continue to decline moderately over the next few months, but will stabilize later in 2019, with some capitals leading growth, according to a study by Jones Lang LaSalle (JLL).
Global comparisons have shown that house prices in the country are high, said Leigh Warner, head of residential research at JLL for Australia. Rapid price growth in recent decades could be linked to the country's economic growth, financial deregulation and supply side constraints, as well as urban structure, tax incentives and ownership.
"My colleague Yad Haidari and I have recently undertaken research to compare Australian housing prices around the world, to study why prices are so high and, by extension, to determine the risk that the current correction will result in deeper price collapse, "Warner said. "We looked at real inflation-adjusted real estate prices in 23 countries and found that Australia had the largest increase in the price-income ratio since 1975. Real estate prices rose 301% between March 1975 and June 2018, against 68% in real terms. returned. "
The country's strong economic performance in the long run and population growth have been important drivers of real estate price growth in recent decades.
The Australian population is concentrated in a few urbanized coastal cities, which has led to price hikes. In the last five years, more than 75% of the country's population growth has been recorded in three cities: Sydney, Melbourne and Brisbane.
"The slowness of construction in the face of population growth has largely contributed to the surge in prices in Sydney and Melbourne. As supply finally reacts, the restrictive conditions for granting bank loans have already limited large-scale building development and supply levels will drop sharply over the next few years. years, "said Warner.
Research has also revealed that the great Australian dream has always been strong, reinforced by a tax system that stimulates investment in residential real estate. The love of property has pushed Australians to devote a larger share of their wealth to their own property or to investment property.
Warner said the high prices of Australian homes would not change. "In the longer term, we will not have the wind power that once boosted borrowing capacity. However, the concentration of the population and strong growth will keep prices high. The chances of a price meltdown will remain low, but over the next few decades, price growth will probably be much slower than we are used to, "he said.
Cause of the collapse of prices in Australia
Warner said the current housing slowdown in Australia is unusual. The slowdown occurred when economic growth is close to trend, interest rates and unemployment are low and population growth is still supporting demand for housing.
In addition, the state of health is concentrated in Sydney and Melbourne. Other capital markets and Australian regions have experienced weak real price growth in recent years and are not experiencing a similar slowdown.
"It can not be denied that policies have both cooled demand and reduced the risk of major overproduction. So with the firm blocking of debt, anything that would cause a sharp collapse in real estate prices would be a demand shock that would drive up unemployment. And the likelihood of such a shock is relatively small, "Warner said.
Future of real estate prices
Given the current tightening of credit conditions, prices are expected to continue to decline in the coming months but stabilize later in the year.
Sydney and Melbourne will probably record only weak growth for an extended period, while revenues will recover. Capital cities like Brisbane and Perth, as well as some regions, are better positioned for solid real price growth starting in 2020.
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