Predictions Property Prices Will Pick Up Next Year Met With Cynicism

It's no secret property prices have taken a dive in major capitals, but new research from Domain predicts things will get better mid-next year. The findings are in stark contrast to pessimism from other industry analysts.

It's the real estate website's first Property Price Forecast -- and it has modelled median house and unit prices in the capital cities to the end of 2020.

“We’re expecting prices to keep falling in 2019, before turning around mid-year and seeing some modest growth towards the end of 2019,” Domain's economist Trent Wiltshire said.

Domain's findings suggest solid population growth, low unemployment and low interest rates will drive property price growth in the period to the end of 2020.

It also predicts unit prices will be more resilient, in part due to stamp duty concessions in Sydney and Melbourne.

Over the past four weekends, more than 1100 properties across the city have failed to sell at auction across Sydney.

But after a nine percent fall in house prices this year, the Domain research shows Sydney will face a further decline of about one percent next year, before growing by around four percent in 2020.

According to the real estate group, Adelaide house prices will continue to rise steadily over the next two years.

After a four year slump, in 2019, house values in Perth are expected to grow faster than any other capital city.

Critic: Industry Has 'To Be Optimistic'

Earlier this month, Domain's new chief executive defended the real estate listings platform saying its revenue stream is not tied to property prices, Fairfax reported.

At Domain's annual general meeting, Jason Pellegrino said the company's cycles were impacted by "volumes not the price" when asked by a shareholder what the board's plans were if the property market crashed.

"Domain makes money off the listing of a property at prices that are not linked to the price of the property," Pellegrino added.

Domain's revenue was down one percent for the first four months of the financial year. This has concerned shareholders about the impact a sustained property slum would have on the company.

"Domain's revenue stream is in no way tied to the price of properties," Mr Pellegrino said.

"They have to be as optimistic as they can be, and may not publish what all of the scenarios are. They don't want to incite panic unnecessarily," Hal Pawson, Associate Director at the City Futures Research Centre told 10 daily.

"They all have vested interests in the property market, and ensuring it remains strong."

Pawson said while there's a lot of focus on property prices, what often goes unreported is the number of properties changing hands.

He said government figures shows that turnover has dropped a lot in NSW. In the second quarter of 2018, 27,000 homes changed hands. That's 15 percent lower than the year before.

"This is something that will have a compounding effect on companies [like Domain] who get a percentage of sales or a percentage of listings," he said.

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Pawson doesn't see much change in property trends for the year ahead.

"It's hard to see anything really change or unwind, or a change to the dynamic unless interest rates are cut. Now they are low now so there is very little margin to do this," he said.

IMAGE: Getty Images

But what about other industry predictions?

CoreLogic's predictions are more dire. Their forward-looking housing model has dropped to the lowest level ever recorded.

In September, UBS's Australian economics team indicated the housing downturn may continue for years to come.

“We expect further credit tightening, and the RBA’s lack of willingness to cut rates this time, to see the longest house price downturn in decades,” UBS George Tharenou said at the time.

"If we are cautious about Domain's predictions we should be cautious about all the property reports from banks and other real estate agencies," Terry Burke, Professor of Housing Studies at Swinburne's Centre for Urban Transitions said.

Burke said it's difficult to understand motives of forecasts -- such as those from the banking sector -- as they may be an indirect appeal to the government as a way to influence policy.

He added that industry predictions are rarely accurate -- and if they are -- "it's usually just pot luck".

"There are so many complex variables in evaluating the property market."

Would A Change Of Government Change Much?

If Labor wins May's Federal election both Pawson and Burke said changes to negative gearing will only have a small impact on the housing industry in the short-term.

"I don't see investors abandoning the market because of negative gearing changes because they are exempt from these changes," said Pawson.

IMAGE: Getty Images

If anything, he said, it will give a little boost to the construction industry as investors will get tax exemptions on newly constructed homes.

"It will stall the pace of property growth under a Labor government. House prices may rise a little less than, or more slowly than, they otherwise would," he said.

Contact the author alattouf@networkten.com.au 

Featured image: Getty Images