No end in sight for Australia’s housing market downturn

By Gerv Tacadena

The current downturn is seen to persist over the next year.

Australia has yet to find the light at the end of the dark tunnel in this current market downturn and experts believe home price weakness will persist into 2019.

Citing the latest Morgan Stanley forecast, news.com.au reported that the current slump in property prices is expected to continue until next year, falling by as much as 15%.

Should this prediction become a reality, Morgan Stanley said this would mark the largest and longest decline Australia had to face since the early 1980s.

"We struggle to see improvement in any of our components over the next year, with pre-existing headwinds of net supply, an RBA on hold and sustained focus on lending standards, all independent of potential negative gearing/capital gains tax changes," the investment bank said.

Also Read: Should Australians fear the projected housing slump?

An oversupply of new apartments and diminishing migration numbers have resulted in supply outstripping demand. This, in turn, has fuelled the trend of lower home prices.

"We now see a 10-15 per cent peak to trough decline in real house prices, from 5-10 per cent previously," Morgan Stanley said.

Starr Partners chief executive Doug Driscoll told news.com.au that the report is not that far from what could really happen over the next years. He pointed out, however, that the rate by which the prices would fall is significantly muted than that by which it boomed five years prior. In fact, Sydney home values ballooned by as much as 60% before prices started to gradually decrease.

"For any kind of market to have that kind of exponential growth is phenomenal. When you look at markets and cycles, there’s typically a correlation between growth and decline," Driscoll said.

For Driscoll, looking at the current downturn is a case of perspective. He reiterated that the property market moves in cycles -- what comes up must inevitably come down. As such, the price declines felt this year might just be the start of what is to come.

"That part of the cycle was more aggressive than probably any in living memory and when it’s so aggressive in ascendancy it might be harsher in descendancy," he said.

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