Housing affordability: QBE report predicts apartment prices to fall, gives hope for first-home buyers

Housing affordability: QBE report predicts apartment prices to fall, gives hope for first-home buyers

A new report may give some hope to younger Australians who are looking to buy their first property.

In its latest Housing Outlook Report for 2017-20, Insurer QBE* forecasted apartment prices on Australia's east coast cities to fall between 4 and 7 per cent by 2020.

QBE Lenders' Mortgage Insurance chief executive Phil White pointed out that it was good news for Australians who were looking to get a foot into the property market.

“Unit prices are heavily influenced by investors, including overseas investors, and the actions being taken by the banks in response to the regulator is certainly now starting to have an impact on investor demand,” Mr White said.

“Units, which are now making up about 50 per cent of all residential construction, are forecast to decline in our four major cities.

“Now this is good for first-home buyers and upgraders as it will ease the affordability issue that we have experienced in most of these cities.”

But there is no mention of a widespread property crash, or even correction.

Indeed Mr White is actually predicting widespread gains in detached house prices.

“This year's report forecasts that by 2020 all capital cities will see an increase in their house prices, with the exception of Sydney and Darwin,” Mr White said.

“However Sydney house prices are forecast only to reduce by about 0.2 of a per cent.”

The report forecasted detached house prices in Brisbane and Adelaide would increase by 7 per cent by 2020.

The report also predicted double-digit house price increases in Canberra, Melbourne and Hobart.

Sydney property investors looking interstate

Property investor Jeannie Smith, 39, has made millions from riding the recent Sydney property market boom.

“If we sold everything we'd probably have 2.4 million,” Ms Smith said.

She is not confident Sydney house prices will continue to rise though, so she is looking to buy property in south-east Queensland and Adelaide.

“My view is I always look long term,” she said.

“As long as you're employed.

“And I guess the goal is to have a tenant, if you're looking at an investment property.

“You're going to be fine, as long as you're not paying too much upfront initially.”

Ms Smith conceded however that she was not going anywhere near the apartment market.

“I wouldn't touch a unit in the inner city right now, or in the foreseeable future — no way.”

Investment experts warn of apartment market correction

Investment experts want to warn property market participants of the consequences of a correction or crash in the apartment market (where prices fall between 10 and 30 per cent).

Fund manager Roger Montgomery manages over a billion dollars' worth of client funds.

He warned a correction in the apartment market could drag the entire housing market down with it.

“If apartment prices were to fall by more than QBE is predicting then there will be a proportion of house buyers that would say 'why would I pay top dollar for a three-bedroom house if I can get a three bedroom that's just fallen 30 per cent',” Mr Montgomery said.

“And so a certain amount of demand for houses is removed and that means house prices fall as well.”

Mr Montgomery also pointed out that QBE's report did not make mention of Australia's high levels of household debt — which is considered a key risk for the property market.

“We have record levels of mortgage debt in Australia, compared to GDP, and compared to incomes, and that's going to come to bear if interest rates rise or if people lose their jobs,” he said.

“At the moment, everything is fine.”

*Readers should be aware QBE insures lenders against mortgage defaults on home loans.

Enquire Now

Fill out the form below and we will get back to you as soon as we can.