No property crash, but slowdown in residential price growth predicted for 2018: ANZ Research
House price growth has continued to slow down, and tighter regulation is having the desired impact, suggests ANZ.
Their research predicts a further slowdown of price growth in 2018, in line with softer auction results and the expectation of higher interest rates
Housing price growth has slowed through the second half of 2017. Nationwide, prices are now just 5.5% higher than a year ago – much slower than the 11% y/y recorded through the middle of the year.
The cooling market has been driven by regulatory changes. APRA’s tightening on investor borrowing and interest-only loans has resulted in higher interest rates for those borrowers, and lowered demand for housing.
Weaker auction results point toward further slowing as we move into 2018. Our forecast that the RBA will increase interest rates next year will also work to lower price growth. But if the RBA doesn’t tighten then prices will likely slow less than we forecast. Importantly, there is still nothing to suggest to us that prices are going to enter widespread declines.
Stamp duty discounts in New South Wales and Victoria are driving large numbers of first home buyers into the market. This is likely to provide some support to demand, and therefore prices.
The deposit burden for FHBs continues to rise, and more people require assistance getting the deposit together. But once they are in the market, low interest rates mean that repayments are affordable, and the interest bill has been falling.
ANZ believe foreign investors have not been the main driver of price growth in recent years, as they account for only a small share of total housing turnover. However, foreigners do make up a significant component of the new housing market, meaning they have more impact in the construction space.
