Property prices set for a big shake-up in 2019

Hobart is the only capital city property market capable of achieving double-digit price growth in 2019, while Sydney and Melbourne could have double-digit falls, according to new forecasts.

SQM Research has forecast that Hobart and Canberra will be the strongest markets, while Sydney, Melbourne and Darwin will be the weakest (see table below).

SQM has provided a wide range of forecasts because it has modelled four different scenarios. The “base case” scenario involves:

• Thecash rateeither staying unchanged or being reduced late in 2019
• The economy slowing
• The Australian dollar floating between US$0.65 and US$0.75
• Labor winning government in May

Under that scenario, Hobart would be the best-performing capital (median price growth of 5 to 9 per cent), while Sydney and Melbourne would be the worst performers (decline of 6 to 9 per cent).

SQM also considered an almost identical scenario, except with the Coalition retaining government. In that case, the strongest market would be Hobart (growth of 7 to 10 per cent) and the weakest would be Darwin (decline of 4 to 8 per cent).

Interest rate moves could change everything

SQM’s numbers change significantly under a third scenario:

• Thecash rateeither staying unchanged or being reduced late in 2019
• Banks making an out-of-cycle rate hike of 20 basis points by the second quarter
• The Australian dollar floating between US$0.65 and US$0.75
• Labor winning government in May

Under that scenario, Hobart prices would increase by 4 to 7 per cent, while Sydney and Melbourne prices would decrease by 6 to 11 per cent.

Again, the forecasts change significantly under the final scenario:

• Thecash rate experiencing two 25-point cuts, starting in the second quarter
• Banks then passing on 25 to 35 basis points (instead of the full 50)
• The Australian dollar floating between US$0.65 and US$0.75
• Labor winning government in May

That would cause prices to rise by 5 to 9 per cent in Hobart and fall by 4 to 8 per cent in Darwin. Prices would also remain unchanged or fall by up to 3 per cent in Sydney and Melbourne.

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