Residential property prices in Australia’s leading inner-cities like Melbourne and Brisbane could tumble by as much as 15% by 2019, according to a leading Australian economist.
Chris Richardson from Deloitte Access Economics has warned that some buyers entering the market now may be left in negative equity as the supply of homes coming onto the inner-city markets look set to soar over the next couple of years, while demand from national and international purchasers, most notably from China, is now starting to fade.
“Booming house prices do help an economy as they occur,” said Richardson. “Eventually, though, they start to hurt.”
“That's always the way, as booming housing prices starts to get old, the last people through the door are the ones who end up getting hurt,” he added.
In the event of a market downturn, Richardson said that many property investors “get less excited about being more wealthy” and begin to realise “that they've signed on to a very large mortgage that they have to pay for a number of years”.
He continued: “House prices will start to go from a positive for economic growth to a headwind.
“You won’t have crash and boom, but you are having, in any particular in inner-city apartments, too many being built relative to the number of likely buyers.
“That says prices will fall from today’s record level.
“In some pockets, you would absolutely expect that by 2019 those inner-city apartments would be selling between 10% and 15% lower in price than today.”