It was supposed to be different there, too
House prices in Sydney and Melbourne could fall by up to 25 per cent this year alone and “there’s a chance they could fall by half” in the coming “property bloodbath”, an economist has warned.
LF Economics founder Lindsay David, who has been warning of the looming property crash for the past five years, said in a report today the recent house price falls were just the beginning.
CoreLogic data for January showed Sydney and Melbourne prices were now 12.3 per cent and 8.7 per cent down from their respective peaks in July and November 2017, with Melbourne falling at “the fastest rate ever seen”.
“We think there’s a chance property prices could fall by half in Sydney and Melbourne over the long run,” David said.
“I wouldn’t be surprised by falls of at least 40 per cent. When all hell breaks loose you’ve only got so many buyers out there.”
His base case of 20 per cent falls in calendar 2019 is significantly more bearish than other experts. AMP Capital is tipping total peak-to-trough falls of 25 per cent in Sydney and Melbourne, while UBS is tipping 25 per cent with a “rising risk of 30 per cent”.
David bases his forecasts largely on the “debt accelerator”, which is strongly correlated with house price growth six months forward. Latest data indicates the debt accelerator is “falling sharply” in Sydney and Melbourne.
If that happens, Sydney and Melbourne “will suffer peak-to-trough falls never experienced before, outside of the 1890s depression and real estate collapse”.
– excerpt and image from ‘Property bloodbath’: Aussie house prices ‘could halve’, Frank Chung, news.com by way of New Zealand Herald, 20 Feb 2019