SQM's Louis Christopher says he's reviewing the annual Housing Boom and Bust Report

SQM's Louis Christopher says he's reviewing the annual Housing Boom and Bust Report
SQM's Louis Christopher says he's reviewing the annual Housing Boom and Bust Report

SQM are reviewing their annual Housing Boom and Bust Report outlook, which they published in October 2017, due to recent developments to the housing market.

The annual outlook - which offered three scenario's - did forecast moderated dwelling price rises in 2018, at a slower rate than the price gains in 2017, led by a slowdown in Sydney.

The SQM housing expert Louis Christopher confirmed the new review in his latest update. 

"Any revisions will be released next Tuesday, 8 May," he said.

It was only four weeks ago that Christopher told the firm's annual conference he was sticking to his forecast of a 4 percent to 8 per cent rise for Sydney and 7 percent to 12 per cent growth for Melbourne.

"APRA will loosen the market again because they are under instruction not to crash the market," Christopher said, according to The Australian Financial Review.

"We think APRA will lift the credit growth limit limit, if that does occur, we think it will stimulate the investor market."
 
"What the banks are doing is they have been lowering interest rates for property investment...the gap between owner-occupier and investor loans has now narrowed."
 
SQM suggest in a worse case scenario - should investors not return - Sydney's house prices would fall only by about 1 per cent, buoyed by steady population growth.

"I think the reality would be that the first quarter will be line-balled whether prices in Sydney and Melbourne have fallen or not.

"If they fall, it won't be more than 1 per cent," Mr Christopher said.

"It's very hard to be bearish when you see strong population growth and low unemployment, unless we see a major credit default occur," he said in March adding Melbourne had a greater chance of a more severe downturn than Sydney, if a large correction happens.

"In absolute dollars, Melbourne is cheaper than Sydney, but compared to incomes Melbourne is more expensive and more susceptible to a downturn," Mr Christopher said.

SQM Research’s base case forecast last year for 2018 was for capital city dwelling prices to rise between 4% to 8% in 2018, which would represent a fall from a growth rate of approximately 8.5% over the past 12 months to 30 September 2017. 

The rate of property price increases will be slower in 2018, predominantly due to a slowdown in the Sydney housing market, which should continue into the first half of the year. Melbourne’s property market will also lose some momentum, however, this will only be a relatively modest slowdown, according to predictions in Christopher’s Housing Boom and Bust Report

“Offsetting a slowdown in Melbourne and Sydney will be first-year property market recoveries for Perth and Darwin and an ongoing real estate boom in Hobart’s property market, which is set to record the highest level of accelerated price growth of any capital city next year at between 8% to 13%,” Christopher said.

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SQM's Louis Christopher says he's reviewing the annual Housing Boom and Bust Report

The report forecast Brisbane’s property market will experience slightly stronger gains than those posted in 2017, with property prices forecast to rise between 3% to 7%. However, the persistent overhang of surplus property listings will hold back property in that city from a faster rate of inflation. 

The base case for all capital cities forecasts assumes no changes in interest rates next year, a stable exchange rate and the existing restrictions by APRA on investment lending to remain in place. 

“Through the actions of APRA earlier this year, a possible deeper housing correction in Sydney and Melbourne has been averted, for now. Accelerated population growth rates in Melbourne and Sydney have enabled the cities to avoid severe property downturns. On the flipside, housing affordability will likely continue to deteriorate in 2018 with growth in property prices still outpacing wages growth,” said Christopher. 

“The authorities were right to take action earlier this year to restrict investing lending by banks. Failure to have taken action would have resulted in out-of-control Sydney and Melbourne housing markets, where additional aggressive monetary policy may well have triggered a large fall in dwelling prices in 2018,” said Christopher.

“APRA’s action, which came earlier than I had expected, has meant that the Sydney housing market is cooling sooner than expected. That has meant our Sydney forecast for this year of price growth of 11% to 16% will not be reached and a more moderate 6% to 8% increase in prices can be anticipated for 2017.

“Our Sydney forecast for 2018 is for a 4% to 8% increase in prices whereby Sydney will record a soft market in the first half of the year, but property prices will start to recover in the second half as the banks will likely increase investment lending once again. There have been reports of banks investment lending ratios being under the maximum thresholds allowed, so we can expect a rise next year as banks increase investment lending up to this limit.” 

“Hobart’s property market is expected to remain the fastest growing city in 2018, with the combination of a fast economy and housing supply shortages likely to ensure the second year running of double digit price rises for that city,” Christopher said. 

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Sqm Research Price Decline

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