University of Wollongong Professor Alex Frino reviews the 2017 housing market, looks to 2018

Picture: Frances Mocnik
Picture: Frances Mocnik

Illawarra residents who have been struggling to get into the housing market could be in for some relief next year. 

However, there may be less positive news for current home owners. 

That’s according to Alex Frino, Professor of Economics at the University of Wollongong.

Prof Frino said analysis of the latest CoreLogic house price data reveals that in the past three years, Illawarra house prices have outpaced Sydney house prices by two to three per cent each year. 

Prof Frino said once final figures were in 2017 would prove no exception, with house price growth in the Illawarra expected to come in about six to seven per cent for the year, with Sydney house prices expected to grow by 2.5 to 3.5 per cent.

“Sydney showed a softening of the market in June, and the Illawarra showed a softening in about August,” he said. “We just lag a little behind what’s happening in Sydney, but we follow suit.”

ANALYSIS: Alex Frino, Professor of Economics at the University of Wollongong. Prof Frino said if any interest rate rises occurred in the near future, it would likely be towards the end of 2018 or early 2019. Picture: File image

ANALYSIS: Alex Frino, Professor of Economics at the University of Wollongong. Prof Frino said if any interest rate rises occurred in the near future, it would likely be towards the end of 2018 or early 2019. Picture: File image

Prof Frino believed the outlook for the market is “not positive” for next year, with regard to impact on house prices and current owners. 

“Current owners are already experiencing a capital loss, and that’s expected to continue well into next year.” 

He noted that for the past three months of this year in the Illawarra and past four months in Sydney, prices have fallen. 

“We have not seen prices fall three months in a row for either Sydney or the Illawarra since at least 2012,” he said. 

“Furthermore, many analysts are predicting zero or negative growth in house prices for Sydney next year, based on the continuation in restrictive lending policies by banks.

“Given the relationship between Sydney and Illawarra house prices, the outlook is not great.  At best, the market will be flat. Worse still, a continuation in the decline we have seen in the second half of the year – since the Australian Prudential Regulation Authority introduced severe measures to curb investor borrowing - is likely.”

Prof Frino said a flat or declining market resulted in a buyer’s market.

“So it appears 2018 is going to be a great time to enter the market, because it’s a soft market,” he said.

“If prices come off a little, and the market’s soft, it’s probably the best time to get in.

“It’s a great time to be out looking to buy if you’re a first time home buyer and if you’re buying for a place to live in, rather than invest.”

Prof Frino said the driver of the soft market is APRA introducing these measures in the second quarter of 2017, which aimed to curb bank lending to investors.

These measures included limiting interest-only loans to 30 per cent of their total new lending; and reducing and restricting lending to investors to below 10 per cent per annum.