Sydney, Melbourne house prices could surge up to 15pc: SQM

Sydney and Melbourne house prices could climb as much as 15pc over the next year, according to new analysis.

Auctioneer Jon Craven sells a property in Sydney’s Tempe. Picture: James Gourley

Sydney and Melbourne house prices could climb as much as 15 per cent over the next year, according to property data analysts SQM Research.

SQM’s growth predictions for 2020 in the “Housing Boom and Bust Report” are modelled on four different scenarios of what might occur over the next 12 months, based on changing market fundamentals and controls.

The base scenario – which would keep the cash rate unchanged at current lows of 0.75 per cent, no intervention from banking regulator APRA until at least the end of last year, a recovering economy and a healthy Australian dollar – sees property prices rise 7 per cent to 11 per cent nationally through 2020.

Yet Sydney and Melbourne are expected to exceed this with price growth of 14 per cent and 15 per cent respectively, taking prices significantly beyond their 2017 peaks to new highs.

READ MORE:

Home affordability on way back down | Domain turns upbeat on property | REA flags gradual recovery

SQM Research managing director Louis Christopher said the combination that influenced the market through the latter half of 2019 will continue to influence market next year.

“The Sydney and Melbourne housing markets have recorded a sharp turnaround in the 2nd half of 2019 following on from the surprise result of the federal election, interest rate cuts, the loosening of credit restrictions and ongoing strong population growth rates. These factors are expected to drive the national housing market into 2020,” Mr Christopher said

In the most likely base scenario, improvements in the Brisbane and Perth mining sectors could see prices in each capital grow between 3 per cent and 6 per cent.

Growth of between 5 per cent and 8 per cent is expected in Hobart, despite analysts believing the market was losing heat.

Adelaide is expected to stay relatively stable with growth between 1 per cent and 4 per cent. The only market expected to fall is Darwin, inching between 5 per cent and 2 per cent lower.
The housing market has bounced back after reaching the bottom of the downturn in June, growing 1.2 per cent in October. Sydney and Melbourne have led the improvement, which is expected to continue at a slow rate into next year.

Mr Christopher does not believe the banking regulator APRA will immediately intervene despite the strong price rises. However, should APRA place restrictions on the market in mid-2020 price growth should slow to between 4 per cent and 7 per cent.

“We have some misgivings on the sustainability of this new recovery. Sydney and Melbourne are rising from an overvalued point. Long term, our two largest housing markets look vulnerable and forever reliant on cheap credit. Housing debt, while falling compared to GDP over 2019, is still very high. Better value can definitely found elsewhere such as Perth and Brisbane”, said Mr Christopher

Should the RBA cuts to 50 basis points by April 2020, the trade war and local economy stabilises and APRA does not intervene in the market, prices could rise higher, settling up between 8 per cent and 13 per cent.

The final and least likely scenario has the market predicted to stagnate, falling 1 per cent or gaining 3 per cent should the trade talks collapse and impact negatively on the global economy and the Reserve Bank cuts the cash rate to zero.