Property market to 'fall flat' in New Year, says economist

by Julia Corderoy17 Dec 2014
The New Year is set to be a year of “flat activity” for the property market with most markets “struggling to hold the inflationary line”, according to a prominent property economist. 

Andrew Wilson, senior economist at the Domain Group, said growing concerns over the performance of the national economy is likely to see the housing market fall flat, even if there is a further decline in interest rates.

“With a weakening economic outlook particularly in regards to the jobs market, the case is growing for a cut in interest rates by mid-2015,” he said.

“Without improved economic conditions and the return of incomes growth and confidence, marginally lower interest rates however are unlikely to have a significant effect on housing markets.”

Historically low interest rates have activated housing markets for the past two years, according to Wilson, however the peak of the current growth cycle was the December quarter 2013 when most capital cities recorded solid to strong prices growth. Since then, growth levels have moderated with most capitals recording falling quarterly trends.

“Consequently, house price growth for most capitals in 2015 is likely to be modest at best, hovering around the inflation rate. The rate of growth in each city, however, will be dependent on local supply and demand factors rather than the overarching impetus of low and falling interest rates which has driven markets generally over the past two years.”

Wilson says the Sydney housing market is set to remain the best performer in the coming year, with growth likely to be at least twice the inflation rate. 

“A top performing local economy and the continued undersupply of housing will generate consistent buyer activity over the year. Inner and middle ring mid-price range suburban regions are set to continue to record double figure prices growth.”