Property slump “appears to be over” as interest rates set to hit historic lows of below 1% while housing prices see small rise

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While interest rates face a potential drop, house prices in the two major markets (Sydney and Melbourne) are slightly on the rise.

From peak to trough, Sydney’s prices will have fallen 14.9 per cent and Melbourne’s 11.1 per cent – and the small rise is proving enough for many experts to declare that the two-year property slump is over.

However, AMP’s chief economist, Shane Oliver, told The Sydney Morning Herald that, while home prices may “are likely to bottom by year end”, they are likely to remain constrained and there are still risks.

“We don’t see a return to boom time conditions but rather expect broadly flat home prices through 2020”, he said.

“[Today], household debt to income ratios are higher, bank lending standards are much tighter such that a return to rapid growth in interest only and investor loans is most unlikely, the supply of units has surged pushing Sydney’s rental vacancy rate well above normal levels and unemployment is likely to drift up as overall economic growth remains weak.”

Capital Economics is more positively predicting a three per cent improvement in dwelling prices over 2020 and a five per cent gain the following year. It is also predicting an aggressive interest rate easing by the Reserve Bank of Australia (RBA).

However, it will still no doubt take years for the market to hit 2017 levels again.