Brisbane dwelling prices will outperform those in Sydney and Melbourne in 2020, according to Westpac.
They believe the Queensland capital will see eight per cent increases next year, above the six forecasted for the two major capital city markets.
Westpac suggest the strong momentum in Sydney and Melbourne will fade as affordability issues re-emerge and population slows.
Brisbane is well positioned due to its affordability and population inflows.
“Momentum heading into 2020 is clearly positive, albeit uneven across markets,” Westpac advised.
They said in the near term, the main guidance comes from current price momentum, auction markets, listings and their buyer sentiment measures.
“Nationally, these are all showing positive prospects for early 2020 with price growth accelerating, auction clearance rates riding high in Sydney and Melbourne, listings showing a clear tightening and a positive pulse from buyer sentiment pointing to a further lift in demand.
“The cyclical momentum is strongest in Sydney and Melbourne but is also showing a notable pick up in Brisbane. Adelaide and Hobart are seeing a more muted lift with Perth yet to pull out of its multi year price decline.
They predict a number of factors to shape residential property over 2020.
“The first is policy – we expect the RBA to cut rates by another 25bps at its February meeting and to turn to so-called unconventional policy measures to provide additional stimulus,” Westpac advise.
The second factor is supply, both in the form of sellers returning to the market and the physical supply of new dwellings. New listings fell to extreme lows in 2019.
“Our analysis suggests the listing cycle tends to follow the sales cycle by about six months. A likely lift in new listings will test the depth of demand in the first half of 2020. The supply of newly built dwellings will also remain elevated. Completions eased back from a record 218k in 2018 to an estimated 205k in 2019.
“Our projections have this easing to around 175k in 2020, still well above average pre-boom levels with about 50k of that high rise dwellings. New supply could prove difficult to absorb and will weigh on prices and rents in some segments – Sydney’s rental vacancy rate and Melbourne’s stock of unsold units being key areas to watch.
Westpac believe would-be buyers in Sydney and Melbourne will be priced out of the markets and will seek more affordable markets if the current price resurgence continues, which will slow growth.
“As 2020 unfolds we expect another dynamic to come to the fore around affordability and population flows.
“Despite the price correction in 2017-18 and a further lowering in interest rates, affordability remains relatively stretched in Sydney and Melbourne.
“The resurgence in prices see these markets run into the same affordability constraints that emerged in 2016-17 as prices near previous peaks.
“Investor activity will lift as low deposit rates and equity volatility drive more interest in real estate but funding is likely to remain a constraint on investors.”