Headwinds ahead in 2017 for housing, but price growth still forecast: Corelogic's Tim Lawless

Headwinds ahead in 2017 for housing, but price growth still forecast: Corelogic's Tim Lawless
Headwinds ahead in 2017 for housing, but price growth still forecast: Corelogic's Tim Lawless

CoreLogic's head of research Tim Lawless estimates that there were around 465,500 dwelling sales over the 2016 calendar year, which was 8.7% lower than a year ago and 3.8% lower than the ten year average.

“Lower sales aren’t necessarily due to lower housing demand," he said.

"In most markets, the slowdown in turnover is more attributable to a shortage of stock available for sale rather than a lack of buyer demand.

"Low stock levels have fuelled a sense of urgency amongst buyers and contributed to short selling times and minimal discounting from vendors.”

Looking ahead across 2017, Mr Lawless noted that the housing market is likely to face some headwinds that may result in a moderation in growth rates.

“Mortgage rates were already trending higher towards the end of 2016, despite any movements in the Reserve Bank cash rate; higher mortgage rates have the potential to quell housing demand, especially considering the record-high levels of household debt which implies consumers are highly sensitive to changes in the cost of debt.

“We’re also seeing high levels of supply weighing down the rate of capital gains in the unit sector.

“With the peak in unit construction due over the coming year, potentially lower unit valuations relative to the off-the-plan contract price, may cause some disruption to the settlement process.”

Additionally, CoreLogic's Tim Lawless noted that regulators may consider implementing policies aimed at reducing investment activity in the housing market.

Based on ABS housing finance data, investors have been progressively increasing their share of mortgage demand since the May and August rate cuts last year. The latest data shows investors now comprise 49% of mortgage demand, excluding refinanced loans.

Mr Lawless said with rental yields at record lows, it is logical to assume investors are largely speculating on future capital gains in dwelling values and disregarding the low yield profile.

"If housing market investment activity does reduce, it has the potential to mitigate some of the upwards pressure on home values.

“Organic factors may also contribute to a reduction in buyer demand and growth rates such as fewer buyers who can afford high housing prices, particularly in Sydney and Melbourne where values have increased substantially more than in other cities.

“Consumer confidence may also affect buyer demand."

Lawless said there is a high correlation between consumer confidence and housing turnover.

"So if confidence measures continue to track lower we can expect consumers to be less willing to make high commitment decisions such as purchasing a property.

"While we expect 2017 dwelling values to rise at a lower rate than in 2016, there is still potential for further growth across Australia’s housing market.

"“Smaller capital cities such as Canberra and Hobart have demonstrated an accelerating growth trend and recent CoreLogic data suggests that Darwin and Perth may be approaching, or moving through the bottom of the downturn.

“Lifestyle markets are also becoming more popular as tourism improves and home owners look to leverage their new found equity,” Mr Lawless said.

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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