RBA warns of declining housing prices impact on apartment developers

RBA warns of declining housing prices impact on apartment developers
RBA warns of declining housing prices impact on apartment developers

Declining housing prices could cause difficulties for some apartment developers, the RBA has warned.

"Recent state and federal budget measures intended to restrain foreign investment have not yet had time to have had their full effects, which are uncertain; however, the effects are likely to be largest in housing markets where foreign buyers have been most active, particularly inner-city apartments," the bank noted. 

Today's Statement on Monetary Policy sets out the Bank's assessment of current economic conditions, both domestic and international, along with the outlook for Australian inflation and output growth.

The bank noted household spending has grown by more in New South Wales and Victoria, where housing prices continue to grow briskly despite some tentative signs of slowing growth recently.

"Large unexpected rises (or falls) in housing prices could lead to changes in the outlook for consumption growth, at least in the short term.

"Elevated debt levels are likely to amplify any risks to consumption; if indebted households become less confident about their future prospects, they could choose to pay down debt faster, in which case consumption growth could be lower than forecast."

The bank advised there are a number of uncertainties that could affect housing prices, particularly in the eastern states.

"The risk of more weakness in apartment prices in some locations where a large amount of supply is coming online remains.

"This could mean that buildings approved but not commenced do not go ahead, in which case dwelling investment and related household spending would be weaker than expected."

Tags: 
Mortgages Price Decline

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