Things can turn around pretty quickly in the property game, it wasn’t that long ago that prospective buyers were throwing money at vendors for fear of paying more if they waited as prices rocketed.
Now though, it’s sellers that have twitchy fingers, and anxiety is no doubt building that they might need to sell now before prices drop any further.
AMP Capital chief economist Shane Oliver has written that tighter lending, housing affordability struggles, oversupply and cooling capital gains expectations could see Melbourne house prices fall by up to 15 per cent by 2020. Ditto for Sydney.
If investors believe property prices are set for a downturn over the next few years they could well decide to sell according to Mr Oliver.
“We are not there yet, but FOMO (fear of missing out) risks becoming FONGO (fear of not getting out) for some investors,” he said.
“Most (cities other than Melbourne and Sydney) are likely to see moderate growth such that the top-to-bottom fall in national average home prices will be more like 5 per cent.”
The Reserve Bank meets today for its decision on interest rates but Mr Oliver says any hikes to the official cash rate are becoming increasingly unlikely.
“With falling home prices set to drive a negative wealth effect, it’s hard to see the RBA raising rates anytime soon and, if anything, there is a significant chance that the next move will be a rate cut,” he said in a written statement.
Paul Dales from Capital Economic last week said he doesn’t think rates will change until late next year at least.
“We believe that rates won’t be raised to 1.75 per cent until November next year,” Mr Dales said.
“And there is a rising chance that rates don’t rise until 2020.
“The recent acceleration in the rate at which house prices are falling must be worrying the bank given that the full tightening in credit conditions has not happened yet.”