Housing price falls have outpaced units in 2019, which have fallen 9 per cent and 6 per cent respectively. Most capital cities have stabilised or experienced slowing declines over the past 12 months, with only Perth and Darwin the exception to the rule as they continue to correct.

Sydney is forecast to fall a further 9.3 per cent this year, on top of the 5.5 per cent falls in 2018. The combined two-year fall of 14.8 per cent will outpace the 2017 rise of 12.8 per cent that took the city to its peak. Unit declines will slow to 5.9 per cent in 2019.

A similar story is being written in Melbourne, with house values forecast to decline sharply in 2019, after a modest correction in 2018. The unit market is also expected to recover in 2020, following a sharp slowdown last year.

The apartment glut that caused unit prices in Brisbane plummet 18 months ago has been absorbed. Unit values are tipped to recover by 0.9 per cent in 2019, followed by stronger growth of 5.8 per cent in 2020.

Housing in Hobart is set for a forecast price rise of 4 per cent, while Adelaide’s growth should be more modest at 1 per cent. Perth will likely decline 7.6 per cent in 2019.

Changes to negative gearing in the next 12 months would change the forecasts causing sharper declines and with ripple effects to hit Australian hip pockets, said Moody’s Analytics.

Labor’s proposed reforms to negative gearing and capital gains tax, to be introduced on January 1 should Bill Shorten win next month’s election, will extend the correction timeline and cause the housing market to further worsen.

Moody’s Analytics forecasters predict that in the current economic environment, housing declines will slow in the third quarter of 2019 before the market begins to recover in 2020.

“The opposition Labor Party has proposed that it will scale back negative gearing for new investors if it comes to power,” a Moody’s Analytics report says.

“If this policy were implemented within the first year of the opposition entering office, already-slowing conditions in the investor segment of the market would be exacerbated.

“Investors have been relatively more impacted than owner-occupiers in the past three years amid tightening of lending conditions that has contributed to the slowdown in home values.

“As investor participation had already slowed, national home values would be expected to reach a slightly deeper trough and have a slower recovery, particularly in the markets where investor participation is higher than the national average, including Sydney, Melbourne and Brisbane.”

House prices have fallen 9.3 per cent since the peak of 2017. However prices are still 20 per cent higher than they were in 2013.

Should the housing market slide further than expected, a negative wealth effect will add to the current concerns over tightened lending by banks and less investor activity, and its impact on Australian’s spending habits, Moody’s Analytics predicts.

Lower consumer sentiment would likely cause consumption to drop and the overall unemployment rate to rise, culminating in a 25-basis point rate cut by the September quarter.

“Annual household consumption slowed to 2 per cent in the fourth quarter from about 3 per cent in late 2017 and early 2018,” said the report.

“Households turning more cautious in this environment is reflected in the household saving ratio increasing to 2.2 per cent, but it is not far off its 12-year low.

“Residential construction was down by 3.4 per cent quarter over quarter in the December quarter, an indication of the nationwide slowdown in the residential property market.”

Last year marked the 27th year of recession-free growth, and it was solid, with GDP growth coming in at 2.8 per cent.

Despite unemployment trending evenly around 5 per cent in 2018, a slow labour market meant only modest improvements in wage growth.

https://www.theaustralian.com.au/business/property/labor-policies-to-exacerbate-home-slump-moodys-analytics/news-story/ff5133a1883858f1674a890edd181a53?fbclid=IwAR0wmKCMhTrf6JwwZM5LzyK8IXfM26QwM4i82rYqlribWDW2-5gqKANIc34

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Opposition Treasury spokesman Chris Bowen has been caught using inaccurate figures to promote­ Labor’s negative gearing policy, after the Australian ­Bureau of Statistics denied claims it had produced data showing that only 7 per cent of property invest­ors bought new homes

Mr Bowen’s use of ABS data has also been challenged by the Grattan Institute, a ­public policy think tank, which has argued that 14 per cent of ­investors buy new properties rather than existing ones — an estim­ate that is double what Labor has claimed.

The capital gains tax discount and negative gearing have also given investors an unfair advantage over first home buyers. In 2015 investors outnumbered owner-occupiers in new housing loans for the first time.

Australia also has some of the most generous taxation concessions for housing investments amongst all advanced economies. In recent years this helped fuel an investor driven property boom, leaving more and more young people and first home buyers unable to purchase a home. The interaction of negative gearing and the capital gains tax discount has also encouraged speculative behaviour exposing the economy to unnecessary levels of financial risk.

The Grattan Institute:

“The combination of capital gains tax rule changes in 1999 and negative gearing has strongly increased the demand for investment properties. Investors compete directly with potential homebuyers, particularly for established houses. This makes it harder for first home buyers to secure a property.” Grattan Institute, Renovating Housing policy, page 13