Housing prices expected to be flat or lower in 2016: Westpac Red Book

Housing prices expected to be flat or lower in 2016: Westpac Red Book
Housing prices expected to be flat or lower in 2016: Westpac Red Book

The majority of home buyers expect housing prices to be flat or lower in 2016, though more than a third believe they will rise, according to the latest analysis of consumer trends by Westpac in its monthly Red Book.

The overall picture around housing, though, is still unclear with choppy reads on both house price expectations and ‘time to buy a dwelling’ indexes through Jan-Feb, although in both cases the sharp slides seen in 2015 appear to be levelling out.

The Westpac-Melbourne Institute Consumer House Price Expectations Index fell 12.5% in February after a 21.4% jump in January, with the index showing signs of settling around the 110 level.

It is still in net positive territory but well below the 10-year average of 125.

Just under 61% of consumers expect prices to be flat or lower in the year ahead, while 35% expect a 0-10% rise and four percent expecting double-digit gains, the report says.

There is a seasonal element to price expectations, though, the report notes and like other housing market measures, house price data is also less reliable over the January-February period in part due to the summer holidays. But available data does show tentative signs of stabilisation after an abrupt slowdown in Q4 2015. 

Price measures show a 0.8% gain for January and a 0.2% rise in the February month to date, RP Data-Corelogic shows.

"The state breakdown shows price expectations have been volatile across the board but are showing signs of stabilising in NSW, are somewhat firmer in Vic & Qld, and falling away sharply in WA," the report notes.

The related ‘time to buy a dwelling’ index also showed volatility through Jan-Feb but with tentative signs that a base may be forming after the sharp pull-back in the first half of 2015. 

Sydney and Melbourne show signs of firming, but at 99.3, the overall level is still weak though, 23 ppts below its long-run average.

The index fell 12.1% in February after bouncing 13.8% in January, with some of the volatility again being seasonal.

But the report points to "some interesting snippets around broad measures of market turnover and auction activity".

"With conditions very uneven across states, auction markets heavily skewed to Syd-Melb and finance data affected by ‘switching’ between investor and owner-occupier segments, turnover is currently the most reliable gauge of total market activity. Latest figures, for Nov, confirm a substantive slowdown in line with ‘time to buy’ readings mid-last year," it says.

Auction clearance rates in early 2016 hint at some firming. Although activity is still 60% below normal, both Sydney and Melbourne have seen clearance rates around 75% vs 62% and 69% respectively for December.

Tags: 
Residential Market Housing Prices

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