Prices across most state capitals are expected to fall over the next two years as property sentiment deteriorates amid the COVID-19 pandemic, according to the latest poll by the National Australian Bank (NAB).
According to the property professionals polled by NAB in Q2 2020, house prices are expected to fall by 2% in the following 12 months and by 0.1% in the year after.
Of the capital cities, Victoria is expected to see the biggest drop at 3% over the next year and 1.1% in the following year.
A report from CoreLogic showed that Victoria's state capital is currently leading the downswing amid the COVID-19 outbreak, reporting price drops for the third consecutive month in June.
Eliza Owen, head of residential research at CoreLogic, said markets with higher incomes, more indebted households, and more active investors are more exposed to changes in economic conditions.
"High levels of investment are also evident in the Melbourne market, which may be contributing to volatility, though this is present in Sydney too," she said.
Also read: Unit Rents Post Biggest Drop In 15 Years
Alan Oster, chief economist at NAB, said prices could decline by around 10% to 15% peak to trough.
"While prices have held up slightly better than expected, they have now declined for two consecutive months across the capitals, and we expect this to continue for some time yet," he said.
Of the capital cities, Melbourne is expected to post the most significant annual price decline this year at 7.3%, followed by Sydney ay 4.7%. Next year, prices in Melbourne are likely to fall by a further 6.5%.
On average, capital cities are slated to record declines of 4.6% this year and 4.3% next year, according to NAB.
"While the initial COVID-19 related restrictions on housing activity have eased, the economy has undergone a very large contraction, and while we appear to have passed the trough in activity, it will take time for the recovery to unfold," Oster said.
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