Slower housing price growth for the rest of 2017: ANZ

Slower housing price growth for the rest of 2017: ANZ
Slower housing price growth for the rest of 2017: ANZ

The latest housing update from ANZ tips weaker auction results pointing to slower price growth for the rest of 2017 with tighter borrowing conditions and higher interest rates for investors to influence price growth in 2018. 

The housing update, authored by Daniel Gradwell, senior economist, ANZ and Joanne Masters, senor economist, ANZ says housing affordability has been steadily worsening in Sydney and Melbourne with first home buyers priced out of the market.

"House price growth has continued to slow down, and it appears that tighter regulation is having the desired impact," it said.

"At the national level, dwelling price growth has slowed over the past three months. Prices are now 9.7% higher than a year ago, down from the peak of 11.4% y/y growth recorded in May this year.

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Slower housing price growth for the rest of 2017: ANZ

"Much of this slowdown appears to be caused by a retreating investor presence in the market, in line with recent regulatory changes.

"APRA’s further crackdown aimed at investor borrowing, particularly those with interest-only loans, has seen the investor share of total borrowing steadily decline.

In turn, price growth has slowed across most capital cities and regional areas and across detached houses and the unit/apartment market.

"Having said that, the Melbourne market has recently been more resilient than the Sydney market, perhaps reflecting an element of ‘catch-up’ after Sydney outperformed in previous years.

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Slower housing price growth for the rest of 2017: ANZ

"ANZ believe this broad slowdown in price growth will continue.

"Weaker auction results point toward slower price growth through the remainder of 2017, while tighter borrowing conditions, and higher interest rates for investors are likely to weigh on growth through 2018.

"Given Melbourne’s recent resilience, we have nudged our 2017 price forecasts higher, and now expect nationwide prices will finish the year 5.8% higher, followed by growth of 2.2% in 2018.

"Note that while we expect price growth will slow, there is no suggestion that prices will fall outright.

"Melbourne and Sydney will continue to be the main drivers of this growth, in line with their expanding populations.

"Strong additions to supply are expected to keep a lid on Brisbane’s prices, while Perth and Darwin are likely to have another year of weakness, as their mining boom adjustment winds up. 

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Slower housing price growth for the rest of 2017: ANZ

 "Although price growth has slowed, and interest rates for owner-occupiers are at record low levels, housing affordability is still a concern.

"This is especially the case in Sydney and Melbourne, where price growth in recent years has far outweighed only modest income growth.

"The effects of worsening affordability have been most keenly felt by first home buyers (FHBs).

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Slower housing price growth for the rest of 2017: ANZ

"The time taken to save a deposit for an average priced house in Sydney, for someone earning an average income, has sharply increased to over ten years.

"Assuming prices rise no faster than incomes in that time!

"The 2017-18 New South Wales and Victoria budgets have attempted to assist this problem by granting significant stamp duty savings for FHBs.

"As a result, the number of FHB finance commitments in July (the first month of the discounts) leapt 28% and 11% in New South Wales and Victoria respectively.

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Slower housing price growth for the rest of 2017: ANZ

"However, as we have noted previously, policies such as these essentially bring more funds into the housing market. We are therefore sceptical that they will address the underlying, long term problem."

"The residential construction cycle appears to have peaked, but recent data suggest that the slowdown may be more moderate than previously feared.

"In fact, we have lifted our near-term profile for residential construction activity and expect investment will flat- line through the second half of 2017, and fall a mild 3.5% y/y in 2018.

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Slower housing price growth for the rest of 2017: ANZ

"Building approvals have started to stabilise after a period of weakness. Approvals were down 11.4% y/y in trend terms in July but this is the slowest rate of decline since late 2016. Assuming this is the bottom of the cycle, it has been a historically modest downturn, perhaps reflecting the fact that the slowdown has been driven by tighter credit conditions not an RBA tightening cycle."

 

 
Tags: 
Housing Market Dwelling Approvals

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