Housing market in for a slowdown in 2016, says new index by CoreLogic & Moody’s Analytics

Home value growth is expected to slow across Australia in 2016 after two years of exceptional appreciation and double-digit growth in many areas, according to a new index.

The just-launched CoreLogic-Moody’s Analytics Australian Forecast Home Value Index forecasts a slowdown in house price growth across the country, underpinned by expectations of slower income growth.

But accommodative policy, robust rental growth, and a recovering labour market are expected to support valuations over the medium term, it said.

The new index makes a quarterly projection of the trend of residential home values across the country over the next 10 years. Forecasts are updated monthly to help market participants identify opportunities and manage risk exposures.

“We are excited to partner with Moody’s Analytics to launch this Forecast Index to provide a unique and critical perspective on Australia’s most valuable asset class, currently valued in excess of $6.4 trillion AUD,” said Craig Mackenzie, CoreLogic EGM, Banking & Finance.

“On the outlook for the housing market nationally, we expect house price appreciation to slow in 2016. Our forecast reflects lower income growth as the Australian economy transitions away from mining-related investment, as well as the strong build-up of housing supply over the past two years,” said Alaistair Chan, a Sydney-based economist based at Moody’s Analytics.

The index currently includes forecasts at a capital city and rest-of-state level.

Regionally, Sydney’s housing market is expected to rebound by late 2016, while Melbourne is expected to go through an extended period of sluggishness. Mining regions, including Perth, the rest of Western Australia, and Darwin, are likely to have downbeat results over the near to medium term. No price declines are expected in Adelaide, although price growth will underperform the rest of the country for the near to medium term.

“Conditions in Melbourne are again expected to outperform Sydney this year, with values forecast to rise by 7.2% in 2016, before slipping back to just 1.3% growth in 2017,” said CoreLogic research director Tim Lawless.

While the pace of house price appreciation is forecast to slow in Sydney, Melbourne and Darwin this year, some pick-up in growth is expected in the remaining capital cities. Hobart, in particular, stands out for better price growth, it adds.