Despite the doom and gloom in the media of further property declines, we do not anticipate prices will experience the sorts of falls that some commentators are predicting. There are several reasons for this.

Historically, all market corrections, property included, happen after a strong and sustained period of price increases. At some point, prices then fall and then stabilise for a period before recommencing a growth phase. The points for contention are how long each period lasts for and to what degree.

We have to remember the old adage that ‘Bad News Sells News’

Whilst prices have declined generally, some geographical areas have experienced greater declines than others. So, there are pockets of decline rather than a whole market decline. This is why property prices in Australia will never fall 30% let alone 40%.

We need to keep in mind that a 5% or 6% or even 10% decline over a year only impacts property owners on paper if they had purchased in the past year. Anyone who purchased in the past 3 to 5 years would in the vast majority of cases, be way ahead of their original purchase price given prices have surged between 20% and 50% in the past 5 years. And remember, you only realise a ‘loss’ if you sell. If you do not need to sell, then once prices reach the ‘stabilisation phase’ (most likely late in 2019 and early 2020) property owners will then be back to their 2018 prices in a couple of years.

Historically prices in the upper end of the market ($2.0m plus) will not dip as much as the mid-level ($1 m to $2m) market as the former market is less reliant on investors and buyers who are reliant on credit.

With the tightening of credit that occurred in 2018 along with the limiting of lending for investment purposes, we have seen the major impact on prices occur in units, particularly where there is an oversupply.

However, with construction funding drying up in recent years, this excess stock will be mopped up leading to potential undersupply in 2020 and beyond. We need to keep in mind that both Melbourne and Sydney have had in excess of 80,000 new residents per year in each city in 2015, 2016 & 2017.

So, our prediction is…….(1) the market will not decline to the extent some media commentators are predicting and (2) due to the lack of future supply combined with population demands, prices will stabilise in early 2020 before heading into positive territory.

And remember when reading any press about property ‘Bad News Sells’