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Property prices predicted to almost halve

Property prices will drop by up to 40 per cent, says one investment manager.

Montgomery Investment Management has told Business Breakfast that Australian property prices are going to fall much further than forecast, dropping as much as 40 per cent in some areas.

Asked on his outlook for the property market, chairman Roger Montgomery was frank when he answered “look, it’s negative.”

“Some of the institutional brokers are forecasting 10 to 15 per cent declines now [and] if it moves 10 or 15 per cent, it’ll be the biggest peak-to-trough decline since the 1980s,” he said.

“I actually think it’ll be worse than that. I think if investors haven’t bought property already they’ll be able to buy property 20, 30, 40 per cent lower than the property’s last traded price,” he added.

Pointing to tightening credit as a result of both the royal commission and the David Murray inquiry into the financial system, as well a huge wave of mortgage refinancing due to occur in 2020, Montgomery said the housing market looked grim.

“In 2020, the 2015 vintage interest-only mortgages mature and they’ll have to be refinanced and there’s about $159 billion worth of mortgages that need to be refinanced. A large portion of those will not be able to be refinanced on interest only terms,” he said.

“There’s going to be people who are going to be selling property, who are going to be forced to sell property.”

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