Sydney, Melbourne and Hobart to be hardest hit by downturn, house prices to fall up to 15 per cent: banks

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PHOTO: Economists predict a double-digit drop in house prices due to the coronavirus outbreak. Photo: iStock

Australia’s strongest performing capital cities are likely to be hardest hit by the second housing market downturn in two years, with banks predicting double-digit price falls due to the COVID-19 pandemic.

ANZ has forecast a 13 per cent drop in prices in the two major markets of Melbourne and Sydney, as well as a 13 per cent drop in Hobart.

NAB is predicting a 15 per cent drop across Sydney and Melbourne over the next 12 to 18 months, while both major banks are predicting an average 10 per cent fall across all capital cities.

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The price downturn would be similar to that suffered throughout 2018 and the first half of 2019, ANZ senior economist Felicity Emmett said.

“It’s essentially wiping out all the gains made since May 2019,” Ms Emmett said. “Melbourne, like Sydney, will be more affected by a drop-off in population growth and no new overseas migrants.”

Ms Emmett said while Sydney and Melbourne would be hard hit, so too would Hobart because of its previously rising prices.

ANZ was anticipating prices to bottom out by mid-2021, with a slow recovery to follow.

NAB chief economist Alan Oster said the recovery would be slower, predicting significant falls over the next 12 to 18 months.