ANZ research recently reported that Australia’s housing market will continue to experience dropping property prices from now until 2019. This prediction is based on the two expected interest rate hikes from the Reserve Bank of Australia (RBA) in the second half of next year, as well as the tightened credit conditions at present.

Market behavior over the last few months seem to confirm this, as weakness on auction results, credit growth, new home loan approvals – as well as lower prices, naturally – were observed.

Currently, prices are 1% lower compared to last year, and price growth overall has decreased for the first time since 2012. The primary driver is the slowdown in Sydney, which amounted to a 4.2% drop year on year, and Melbourne, which has also recorded drops.

While interest rates have always been a primary force in market performance over the years, ANZ Research believes that the current cycle is being largely affected by the tightening of credit availability – investors are finding it harder to obtain credit after the recent changes in lending policy.

On a brighter side of things, the country’s economy is trending upward in the long-term, so the overall outlook is positive. “Ongoing employment growth, (gradually) improving wages growth, and population growth running at well above average levels should support house prices in the medium term,” ANZ Research emphasized.

ANZ Research anticipates housing prices to decrease by 4% in 2018 and an additional 2% in 2019.Sydney and Melbourne are seen to be the primary reasons for the pull of market prices.  Both of the cities’ prices are expected to drop by 10% peak-to-trough, with Sydney performing slightly worse than Melbourne.

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