Shane Oliver, AMP chief economist, says Melbourne and Sydney could face a 20 per cent drop in property prices.
He predicts the fall will “unfold over the next couple of years” with prices bottoming out sometime around 2020.
He credits the Royal Commission into banking making it more difficult to get a home loans, an ongoing increase in the supply of housing, and a decline in foreign purchases.
He said low rental yields make it less attractive for investors. He said prices should fall back to where they were in 2015.
He said the last few years had been “great news for the baby boomers.”
“The last few years when prices went up, great news for the baby boomers and generational x if they got in. Not very good at all for Millennials who are trying to get in. Now with prices coming down not so great for the baby boomers – in fact a little bit depressing for them. Mind you they are still doing well as prices got to a place the never expected. It will be good news ultimately for millennials – lower house prices will improve affordability and make it a lot easier to get into the property market.”