House prices in Sydney and Melbourne are expected to surge by up to 17 per cent next year following a record slump.
Real estate data group SQM Research is forecasting price rises in every state capital in 2020, with lending rules now relaxed and interest rates at an all-time low.
In the event the Reserve Bank of Australia cut rates again by Easter, to a new record low of 0.5 per cent, Melbourne property prices would skyrocket by 12 to 17 per cent as Sydney prices zoomed by 11 to 16 per cent.
This would more than reverse the record slump in real estate values that began in 2017, but there are fears the recovery might not last.
Sydney and Melbourne were far from the only cities tipped to enjoy price increases next year should interest rates be cut again by a quarter of a percentage point, in line with financial market pricing.
Values were expected to rise by six to nine per cent in Hobart, four to eight per cent in Canberra, four to seven per cent in both Brisbane and Perth and one to four per cent in Adelaide.
Darwin, however, was predicted to buck the trend, as house prices fell by one to four per cent.
SQM Research managing director Louis Christopher said recovery in Sydney and Melbourne house prices since the middle of 2019 was expected to continue next year with interest rates at a record low and immigration at high levels.
‘These factors are expected to drive the national housing market into 2020,’ he said.
The Australian Prudential Regulation Authority’s relaxation of lending rules in July was also expected to underpin a real estate recovery.
Banks are no longer required to model a potential borrower’s ability to repay a 7.25 per cent standard variable rate.
Standard variable mortgage rates have since fallen below three per cent, after the Reserve Bank of Australia in October cut the cash rate to a new record low of 0.75 per cent.
The downturn in Sydney and Melbourne began in 2017 after the APRA imposed stricter rules on investors and interest-only loans.
This saw Sydney’s median house price dive by more than 17 per cent, from the peak in July 2017 to the trough in mid-2019.
While the banking regulator’s restrictions were this year eased, Mr Christopher said the Sydney and Melbourne property markets were still overvalued.
‘We have some misgivings on the sustainability of the new recovery,’ he said.
‘Sydney and Melbourne are rising from an overvalued point.’
SQM Research said Sydney and Melbourne prices could remain flat if the US trade war with China, Australia’s biggest trade partner, escalated and the RBA cut interest rates to zero for the first time ever.
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