Sydney house prices 'to fall 5 per cent over next two years', according to BIS Oxford Economics

After a four-year property boom, Sydney’s house prices are expected to decline from mid-2017 onwards with even higher declines likely in national apartment markets, a housing research company predicted on Thursday.

From mid-2017 a correction is expected to begin in the housing market that will see house prices drop by 5 per cent in two years, BIS Oxford Economics managing director Robert Mellor said at the Building Industry Prospects conference in Sydney.

“Given that price growth over the last 12 months has been much greater than we would have anticipated six or 12 months ago we now expect price declines probably between 2017 and 2019 somewhere in the order of 5 per cent in the detached housing market in Sydney,” Mr Mellor said.

The median house price was likely to peak “at $1.2 million” by mid-2017 before falling, he said. These price declines are more substantial than those predicted mid-2016 by the firm.

But even a drop of this magnitude won’t shake Sydney’s million-dollar median house price status.

A decline of 5 per cent would be a $60,000 to $70,000 hit but it would still leave prices “above where they were six months ago”, he said.

“By June this year [house prices] will be up 80 per cent since June 2012.”

The apartment market, however, is likely to drop by much higher levels.

Mr Mellor anticipated that those who paid “high prices off-the-plan” might see price declines of 10 per cent or higher.

These falls in prices would also be likely in the Brisbane and Melbourne apartment markets, where he could see prices “easily” dropping 10 per cent in the next two to three years.

But SQM Research managing director Louis Christopher disagreed – saying it was “unlikely” Sydney house prices would decline in the 2017 calendar year. 

Instead, he said it was likely prices would rise by 11 to 16 per cent by the end of 2017 before a possible end to the Sydney boom.

“Next year is questionable … we could see some storm clouds in 2018,” he said.

“It’s still too early to tell.”

Domain Group chief economist Andrew Wilson also argued it was difficult to predict even six months into the future in the “uncertain” economic outlook.

He said it was likely prices would “stagnate” in the second half of 2017, similar to the pattern seen in 2016 when there was a slowdown towards the end of the calendar year.