BIS Shrapnel is predicting that residential property prices will remain stable in 2016-17, but rising supply, weakening investor demand and slowing population growth will cause prices in all Australian capitals to be lower than current prices in real terms by 2019.

The report, ‘Residential Property Prospects, 2016 to 2019’, by BIS Shrapnel, delivers a gloomy outlook for the Australian property market.

The report claims oversupply of property is likely to dampen price growth over the next three years. Completions are at record highs, just as migration levels are falling, and the report predicts there will be more apartments than tenants by 2019.

BIS Shrapnel senior manager and study author, Angie Zigomanis, said, “Nearly all capital cities are building apartments at record rates on the back of the recent strength in investor demand. As these projects are progressively completed, it is likely that there will not be enough tenants in a number of cities to support rents and consequently values upon completion.”

The report also predicts that slower economic growth will weigh on prices, as employment and income growth weaken.

Recent moves by APRA to tighten bank lending to investors will constrain the investor market, which will be compounded by the weaker price growth.

“As investor expectations of capital gains are reduced, investor demand is expected to weaken further, creating additional downward pressure on prices,” said Zigomanis.

Though BIS Shrapnel is forecasting all markets will experience flat or falling prices by June 2019, houses are expected to hold their value better than apartments, and Brisbane, Hobart and Canberra will outperform the other capitals.