The property markets in Melbourne and Sydney both look set for an inevitable drop over the next couple of years in the face of a contracting economy, poor consumer confidence and less migration.
NAB chief economist Alan Oster this week said both markets face significant falls, with Melbourne house prices falling around 4.8 per cent this year and another 3.6 per cent next year.
The predictions are even worse for Melbourne apartments, predicted by NAB to fall 10 per cent this year and 4 per cent next year.
“While both the depth and duration of the downturn underway remain uncertain – and will depend on the evolution of the spread of COVID-19 – we expect a sharp fall in economic activity in the near-term, followed by a rebound in growth but slower recovery in activity levels,” Mr Oster said.
“While interest rates are very low and will act to support prices, rising unemployment, slower wage growth and weak confidence will weigh on prices.”
“Also, while we do not see a fundamental oversupply in the market (with construction continuing to decline), a slowing in migration will see demand for housing somewhat.”
CoreLogic figures have already started to show a drop in house values in Melbourne in April and a drop in the number of homes up for sale.
NAB forecasts unemployment to hit 11.7 per cent this year before falling to around 7.3 per cent next year.
In an official statement, Mr Oster said, “we expect quarterly GDP growth will fall by around 7 per cent in Q2 following a small fall in Q1.”
“Coronavirus containment measures have seen a significant fall in consumer and business confidence with an outright restriction on some forms of activity.”
“While growth will rebound as restrictions are lifted we do not see the level of activity recovering until early-2022,” Mr Oster said.