The home price recovery in Sydney and Melbourne over the last two months may be short-lived, with the market set to weaken going into 2021, according to a new report.
Property settlement provider PEXA has produced a report on settlement and refinancing activity in NSW and Victoria, which includes analysis relevant for downsizers weighing up a home sale decision.
As the chart from the report below shows, home sale values have generally increased from July to September, although are still well below values at the start of the year.
However, the report says the future for the market is still looking gloomy, because of weakening consumer confidence and reduced migration.
“Economic growth, employment and household gross domestic product and household income are expected to remain weak over the next few quarters, indicating a downside risk for housing market activities in the short to medium term,” the report says.
“Persistent labour market weakness may result in a longer period of weak house price growth than seen in previous cycles.
“Border closures will reduce net migration and housing demand (and) a fall in overseas student numbers will likely reduce demand for rental properties, especially around universities and in capital cities.
“As a large proportion of migration comes from students who remain in Australia after finishing their studies, the effect on the overall housing market could be quite long-lived.
“Analysing previous housing cycles and key economic drivers suggests that in the medium term, house prices and new loan commitments will decline further.
“Even after recovery in the key drivers of housing activity, there is likely to be a lag before any increases in property values and sales emerge.”
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