Dwelling values in Sydney will slide further in 2019, according to a forecast by CoreLogic.
In early December, the total decline in Sydney dwelling values since the market peaked was already greater than what was recorded during the last recessions, when the city logged a 9.6% drop in values from peak to trough between 1989 and 1991. This trend is likely to continue this year.
CoreLogic said that the persistent weakness will be potentially driven by several factors, such as the ongoing restrictions on home lending, less housing demand as population growth slows, and weaker conditions across the high-rise unit markets where new supply is set to surge as a large number of projects under construction transition to settlement.
The study also indicated that although housing prices are declining, the median value of a Sydney dwelling remains around nine times higher than the median household income. This implies that affordability challenges will probably continue.
Robust labour-market conditions, improving first-home buyer participation, high overseas migration and a smooth transition from residential construction towards major infrastructure work are some of the factors that could help counter the anticipated issues in the market.
Low mortgage rates will also keep a floor under housing demand, but with credit availability remaining tight, the stimulus of low interest rates is less effective, CoreLogic said.
CoreLogic reported that housing finance will still be a significant hindrance in housing market conditions this year. Given that the household debt remained at record levels in 2018, it is unlikely that the 30% limit on interest-only lending implemented by Australian Prudential Regulation Authority will be lifted in 2019, CoreLogic said.
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