Stable growth forecast for 2019 property prices

Stable growth forecast for 2019 property prices

Domain has forecast that the value of Australia’s home loans should grow at a modest pace in 2019 and 2020, though there are several potential risk factors that could influence these predictions.

The report from Domain economist Trent Wiltshire found that property prices trended downwards over 2018, due to a combination of:

  • investor caution;
  • tighter bank lending practices;
  • weak sentiment, and;
  • new housing supply.

Looking to the future, the value of Australian home loans is forecast to slowly pick back up again in 2019 and 2020 as banks and borrowers adjust to these conditions, backed up by:

  • projected strong (if slowing) population growth;
  • lower unemployment;
  • faster wage growth, and;
  • increasing first-home-buyer activity.

House price forecasts*

City 2018 (estimate) 2019 (forecast) 2020 (forecast)
Australia (combined capitals) -6% 1% 4%
Sydney -8% 0% 4%
Melbourne -9% -1% 4%
Brisbane 0% 4% 5%
Perth -5% 5% 3%
Adelaide 2% 2% 2%
Hobart 12% 2% 2%
Canberra 2% 4% 4%

Unit price forecasts*

City 2018 (estimate) 2019 (forecast) 2020 (forecast)
Australia (combined capitals) -3% 2% 3%
Sydney -3% 3% 5%
Melbourne -1% 1% 1%
Brisbane -6%% 3% 3%
Perth -6% 2% 2%
Adelaide -1% 2% 2%
Hobart 0% 0% 3%
Canberra -5% 2% 2%

*Annual change to December quarter. Darwin excluded due to small volumes and market volatility. Stratified median house/unit price forecasts.

While these predictions paint a picture of growth for Australia’s house prices, factors that could limit this growth include:

  • The RBA raising the nation’s cash rate earlier than expected
  • Further tightening of mortgage lending regulations
  • Investors being forced to switch from interest-only home loans to principal and interest home loans that they can’t afford
  • Lower population growth
  • Chinese economic slowdown

Factors that could lead to Australian house prices growing faster than the Domain predictions include:

  • Fast slowdowns in housing constriction
  • Government intervention to support the property market
  • Improving sentiment from economic growth

Mr Wiltshire said that a potential wild card in the deck would be the 2019 federal election. An ALP victory could lead to the introduction of new policies limiting negative gearing to new properties (with all existing negatively geared properties ‘grandfathered’) and slashing capital gains tax discounts on investments from 50% to 25%:

“Property prices will most likely fall in response to this policy change as fewer investors will be wanting to invest in established residential property.”

“But there is also the possibility that if the ALP proposes a start date of 1 July 2020, this may bring forward some investor demand to take advantage of the grandfathering proposal, and actually push up prices in 2019 and early 2020, with prices being pushed down by the new policy in 2020-21.”

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Learn more about home loans

Who offers 40 year mortgages?

Home loans spanning 40 years are offered by select lenders, though the loan period is much longer than a standard 30-year home loan. You're more likely to find a maximum of 35 years, such as is the case with Teacher’s Mutual Bank

Currently, 40 year home loan lenders in Australia include AlphaBeta Money, BCU, G&C Mutual Bank, Pepper, and Sydney Mutual Bank.

Even though these lengthier loans 35 to 40 year loans do exist on the market, they are not overwhelmingly popular, as the extra interest you pay compared to a 30-year loan can be over $100,000 or more.

What happens to your mortgage when you die?

There is no hard and fast answer to what will happen to your mortgage when you die as it is largely dependent on what you have set out in your mortgage agreement, your will (if you have one), other assets you may have and if you have insurance. If you have co-signed the mortgage with another person that person will become responsible for the remaining debt when you die.

If the mortgage is in your name only the house will be sold by the bank to cover the remaining debt and your nominated air will receive the remaining sum if there is a difference. If there is a turn in the market and the sale of your house won’t cover the remaining debt the case may go to court and the difference may have to be covered by the sale of other assets.  

If you have a life insurance policy your family may be able to use some of the lump sum payment from this to pay down the remaining mortgage debt. Alternatively, your lender may provide some form of mortgage protection that could assist your family in making repayments following your passing.

What is a fixed home loan?

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

What is breach of contract?

A failure to follow all or part of a contract or breaking the conditions of a contract without any legal excuse. A breach of contract can be material, minor, actual or anticipatory, depending on the severity of the breaches and their material impact.

How personalised is my rating?

Real Time Ratings produces instant scores for loan products and updates them based what you tell us about what you’re looking for in a loan. In that sense, we believe the ratings are as close as you get to personalised; the more you tell us, the more we customise to ratings to your needs. Some borrowers value flexibility, while others want the lowest cost loan. Your preferences will be reflected in the rating. 

We also take a shorter term, more realistic view of how long borrowers hold onto their loan, which gives you a better idea about the true borrowing costs. We take your loan details and calculate how much each of the relevent loans would cost you on average each month over the next five years. We assess the overall flexibility of each loan and give you an easy indication of which ones are likely to adjust to your needs over time. 

What is a specialist lender?

Specialist lenders, also known as non-conforming lenders, are lenders that offer mortgages to ‘non-vanilla’ borrowers who struggle to get finance at mainstream banks.

That includes people with bad credit, as well as borrowers who are self-employed, in casual employment or are new to Australia.

Specialist lenders take a much more flexible approach to assessing mortgage applications than mainstream banks.

How can I get a home loan with no deposit?

Following the Global Financial Crisis, no-deposit loans, as they once used to be known, have largely been removed from the market. Now, if you wish to enter the market with no deposit, you will require a property of your own to secure a loan against or the assistance of a guarantor.

Mortgage Calculator, Repayment Frequency

How often you wish to pay back your lender. 

Mortgage Calculator, Deposit

The proportion you have already saved to go towards your home. 

Does each product always have the same rating?

No, the rating you see depends on a number of factors and can change as you tell us more about your loan profile and preferences. The reasons you may see a different rating:

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Why is it important to get the most up-to-date information?

The mortgage market changes constantly. Every week, new products get launched and existing products get tweaked. Yet many ratings and awards systems rank products annually or biannually.

We update our product data as soon as possible when lenders make changes, so if a bank hikes its interest rates or changes its product, the system will quickly re-evaluate it.

Nobody wants to read a weather forecast that is six months old, and the same is true for home loan comparisons.

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An complaints officer – previously referred to as an ombudsman -looks at formal complaints from customers about their credit providers, and helps to find a fair and independent solution to these problems.

These services are handled by the Australian Financial Complaints Authority, a non-profit government organisation that addresses and resolves financial disputes between customers and financial service providers.

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Real Time RatingsTM uses a range of information to provide personalised results:

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