UBS says population growth to thwart property prices going backwards

UBS says population growth to thwart property prices going backwards
UBS says population growth to thwart property prices going backwards

A new report from UBS has forecast a slump in house price growth next year, but no crash.

The investment bank's report forecast that the correction would see annual house price growth to fall from 10 per cent now to 7 per cent by the end of 2017.

It will further reduce next year with growth forecast between zero and 3 per cent in 2018.

"We 'called the top' [in April] and now have increased confidence a correction is unfolding, but still don't see a crash," said economists George Tharenou and Scott Haslem.

"Looking ahead, price growth has likely already peaked, and we still see moderation ahead, amid record supply/completions, poor affordability and rising mortgage rates.

"But, we still don't see prices dropping given booming 'people' growth," the UBS economists said.

The economists expect both building commencements and construction activity to have a "sharp downturn until at least the end of 2018, but said the lack of RBA rate hikes "reduces the chance this becomes a crash where commencements plunge to prior cycle lows closer to 130,000 (a year) which would then see a weaker labour market and falling prices". 

Last month the UBS chief economist for Australia and New Zealand, Scott Haslem announced he was resigning from the investment bank after 19 years.

The internal replacement was named as George Tharenou will be taking over the role from Mr Haslem, who will be pursuing opportunities outside sell-side research, UBS said in a statement.

Mr Tharenou has been at UBS since 2006, and has previously worked in the Reserve Bank of Australia and Queensland Treasury.

Tags: 
House Prices Population Growth

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