Predictions for Melbourne’s cooling property market

Melbourne and Sydney are predicted to be in the “centre of the storm” in a housing downturn, economists say.

Property prices are forecast to continue to fall in the two major cities, and data from CoreLogic shows Melbourne’s house prices have dropped 3.4 per cent in the past year.

The drop in Melbourne is the fastest in almost six years.

Capital Economics chief economist Paul Dales told Neil Mitchell he predicted a gradual cooling of the market in the coming years.

“Our suggestion is at the national level prices will fall by about 12 per cent, that will be spread out over a number of years, maybe three or four years,” he said.

“A gradual grind lowering of house prices, rather than the sudden sharp significant decline that the US experienced during the global financial crisis.

“The biggest falls will be felt in Sydney and Melbourne, they are the two cities that have the largest gains.

“It’s those cities that will feel the sharpest falls, perhaps 15 per cent each maybe, it’s hard to know but I think they are in the centre of the storm.”

He said home owners with small deposits of 5-10 per cent were most vulnerable if house prices falls, which could result in the asset being worth less than the loan.

Click PLAY to hear more