Property prices will continue to cool into 2018, but low rates and strong population growth should prevent a severe correction.
HSBC Global Research has predicted that national housing price growth will slow to 3 per cent to 6 per cent in 2018 from the double-digit highs of recent years.
The research was published amid data released by the Australian Bureau of Statistics (ABS), which reported that residential property prices across Australia’s capital cities fell by 2 basis points in the June to September quarter of 2017, with Sydney’s property prices falling by 1.4 per cent over the same period.
The HSBC report notes that the housing slowdown has been driven by increased dwelling supply, tightened regulations and a reduction in demand from foreign investors following recently imposed restrictions on foreign buyers.
“We expect these factors to continue to weigh on housing price growth in the coming quarters and retain our forecast that national housing price growth will slow from the double-digit rates of recent years to 3–6 per cent in 2018,” the report reads.
However, HSBC also notes that despite its prediction of a continued slowdown, Australia’s growing population and record low interest rates will prevent a severe downturn in the market.
“[We] do not expect a sharp decline in housing prices and expect only a modest decline in construction activity, as both are likely to be supported by strong population growth and low interest rates.”
Further, the global bank’s research agency predicts a “slow pace of cash rate tightening” by the Reserve Bank of Australia in 2018, and it expects some “relaxation” of prudential regulations.
HSBC believes that growth in the Australian housing market has been sustainable, forecasting that the slowdown will correct disparities across the market.
“[We] do not see a significant local housing imbalance and view Australia as having had a housing boom rather than having a housing bubble.
“The ramp-up in Sydney and Melbourne house prices has reset the relativities among the capital cities, for example, with Sydney back to twice Perth prices.”