I think some of you guys must have read the following article but for others I am putting this link. What are your expert opinions on this article? from the Australian Homeowners and property investors are facing steep falls in house prices and a weakening rental market as a new wave of apartment development combines with stalling population growth to create a glut in some areas. In perhaps the bleakest assessment of the local housing market so far, BIS Shrapnel analysts have predicted median house price falls, an oversupply of apartments and serious vacancy issues which will bite all capital cities by June 2019. Homes in Sydney, Melbourne and Adelaide are likely to sustain falls of 2 per cent in nominal terms, and steeper drops of 10 per cent in real terms — which takes inflation into account — as population growth plummets to 10-year lows and more than 220,000 new homes started this year approach completion. The data has shone a light on a growing disconnect between detached housing and apartment markets, with apartments tipped to suffer price falls more than double those of detached homes, and analysts questioning whether rental demand was strong enough to mop up new supply. “Nearly all capital cities are building apartments at record rates on the back of the recent strength in investor demand,” BIS Shrapnel senior director Angie Zigomanis said. No buyers’ remorse “As these projects are progressively completed, it is likely that there will not be enough tenants in a number of cities to support rents and consequently values upon completion.” Sydney’s median apartment price is predicted to fall by 5 per cent by 2019, while Melbourne apartment prices could fall by as much as 8 per cent. Brisbane apartment prices will fall by around 6 per cent, followed by Darwin at 4 per cent, and Adelaide and Perth winding back 2 per cent. The new data adds weight to concerns aired by executives and analysts about the stability of house prices, property investment and the local banking sector, given settlement risk is climbing higher and Australian households are now the most indebted in the world. Stockland chief executive Mark Steinert told The Australian he believed the predictions were too bearish, but he agreed with the report’s appraisal of the difference between the performance of apartments and houses. “With apartments, there will definitely be pockets of oversupply ... you’ve got some areas like Sydney’s southern precinct — the one between the airport and the south of city — where you’ve had a lot of development in a very short amount of time,” he said. “In those sorts of circumstances, I think you can expect a limiting impact on demand, and there could be retracement (in prices).” Other analysts believe apartment falls could be steeper. “I think the BIS economists are being a bit too optimistic,” said AMP Capital economist Shane Oliver. “My own view is that in the next few years we’ll see bigger falls, perhaps 5 or 10 per cent for house prices around 2018 or 2019, and for apartments, I won’t be surprised if they come off by 15 to 20 per cent ... the only question is how much they’ll go up beforehand.” House prices have risen 8 per cent during this year to date, despite a drastically tightened lending environment and predictions that the 12 per cent price growth recorded in 2015 would halve. Against that backdrop, buyers and investors have told The Australianthey’re not prepared to delay buying property in fear of a downturn and they will capitalise on an accommodating lending environment and low interest rates while they can. Economists dismissed the suggestion that widespread price falls could undermine the stability of local banks. Balance sheets were strong, and most loans had been issued on sufficiently conservative terms, said former bank chief executive David Murray, and while the prospect of Australia losing its AAA credit rating could put some pressure on loan books, that represented only a small component of the funding mix. HSBC economist Paul Bloxham pointed to rising rental vacancies that he believes could place pressure on some owners, as a slew of new investment properties hits the market and joins competition for tenants. Australian Prudential Regulation Authority measures to tighten lending to investors in place for 18 months meant investors were well-enough positioned to weather short-term vacancy or rent issues, he said. “There’s a collection of things which have been happening to help make sure that if we do see apartment prices fall, borrowing won’t cause too much of a risk to the system.” Mr Oliver agreed: “To have a big problem, you’d need to have unemployment or a recession that causes them to default on their loans ... the experience to date is homeowners can manage price falls and keep servicing their debts if there’s no recession. The real risk is for developers who might have come to market at the wrong time, but we’re yet to see that unfold.