PHOTO: Widespread speculation that house prices in Australia’s premier markets are set to go into a free fall is overly pessimistic, according to a new report by KPMG Economics.

The report Housing Affordability: Sydney and Melbourne housing market update has found that Sydney and Melbourne house prices will continue to fall further this financial year, before plateauing and then recovering over the following two years.

This is an update to a major study by KPMG Economics released in June 2017.

While there will continue to be price declines in the near term, KPMG expects prices to bottom out in Australia’s two major cities in calendar year 2019. The market will then start to see price growth again in Melbourne during 2020 and Sydney in 2021.