Melbourne and Sydney’s joint housing market slide could contribute to a recession, a leading commentator has declared.
Louis Christopher of SQM Research said the deepening downturn was “shaping up to be the worst … we’ve seen since the 1990 recession”, with a peak-to-trough fall of up to 30 per cent potentially on the cards.
He said househunters shouldn’t rush to buy into Australia’s two biggest cities.
SQM’s latest Housing Boom and Bust Report states Melbourne dwelling prices — taking into account houses and units — have fallen 4.7 per cent this year and are expected to shed up to 9 per cent in 2019.
This marks a dramatic turnaround from last year’s 12.1 per cent growth.
Mr Christopher has predicted a peak-to-trough decline of at least 12-17 per cent for Melbourne and Sydney by the end of 2019.
He said could rise to 20-30 per cent if the downturn continued into 2020 — a plausible outcome if “the Reserve Bank does not intervene in the market” and the Labor Party repealed negative gearing, assuming it won next year’s federal election.
He dubbed the latter “risky policy in this type of market”.
“There’s an elevated risk that we could go into recession with Sydney and Melbourne having such big downturns,” he said.
“Many people are fearful of buying.”
Mr Christopher blamed “restrictions on credit” for kickstarting the fall, and said negative market sentiment was feeding it.
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