The major bank says housing will become less of a contributor to the national economy as stricter lending around property development and foreign investment weigh on demand.
The housing sector has been a key driver of the Australian economy over the past two years, but ANZ economists believe it is nearing a broad peak.
“Tighter lending criteria and significant additions to the supply of housing are likely to result in slower growth in both construction activity and prices through the remainder of 2016 and into 2017,” they said. “As such, our view is that the contribution to the economy from the housing sector is set to ease.”
ANZ predicts the slowdown will be driven by tighter lending standards on key borrower segments.
“A number of major lenders have either exited the foreign investor segment of the market or have made a variety of adjustments, including requiring foreign buyers to hold a larger deposit and reducing the amount of overseas income when calculating the ability to service a loan,” the bank said.
“On the policy front, the states have announced additional taxes on foreign buyers in their respective 2016-17 budgets. New South Wales introduced a 4 per cent stamp duty surcharge for foreign buyers, who will now also pay an additional 0.75 per cent land tax surcharge.
“Victoria expanded its foreign stamp duty surcharge from 3 per cent to 7 per cent, while Queensland introduced a 3 per cent stamp duty surcharge for foreign buyers.”
Easing demand is expected to see price growth slow from hereon, ANZ said. “From a peak of 12.8 per cent in September 2015 and 8.1 per cent currently, we expect national house prices to rise by 6.4 per cent and 1.7 per cent in 2016 and 2017 respectively.”
The big four bank also expects construction activity to moderate. Building approvals remain below last year’s peak, suggesting that the rapid growth in starts and work done is unlikely to be sustained, it said.
“However, a tremendous backlog of work will continue to support construction around record levels.
“In fact, the large backlog of construction work presents a risk of oversupply emerging in some markets. Significant additions to the supply of apartments are forthcoming in Brisbane and Melbourne, raising fears of settlement risk and eventual price declines.”