ANZ Research’s view for some time has been that tightening in credit has been the major driver of weakness and, while there has been some easing at the margin, changes to the use of Household Expenditure Measure (HEM) and the introduction of comprehensive credit reporting will offset some of the impact.
Moreover, there is still a substantial amount of supply coming on stream, particularly in Sydney where the rental vacancy rate is at a 15-year high. Though Sydney has fallen the furthest, the supply overhang and rental vacancy suggests the recovery in Sydney is likely to be fairly modest.
Meanwhile, Melbourne prices will benefit from ongoing strong population growth.
Nationwide, ANZ Research expects prices to bottom out in coming months and rise modestly through to the end of 2019, before gaining around 3 per cent in 2020.
Adelaide Timbrell is an Economist and Felicity Emmett is a Senior Economist at ANZ