ANZ expects that price growth will continue to moderate through next year, but it doesn’t anticipate materially lower prices.
“Housing price growth has slowed through the second half of 2017. Nationwide, prices are now just 5.5 per cent higher than a year ago, much slower than the 11 per cent year-on-year recorded through the middle of the year,” ANZ senior economists Daniel Gradwell and Joanne Masters said in a recent housing market update.
“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,” the economists added.
ANZ believes that weaker auction results point towards 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.”
The senior economists do not believe that 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, they noted that foreigners do make up a significant component of the new housing market and therefore have more impact in the construction space.
“The expected slowdown in the residential construction cycle over 2017 and 2018 looks set to be more muted than we forecast at the start of this year.
“We continue to expect the level of construction activity to ease from current elevated levels, but the slowdown is forecast to be relatively mild.”
[Related: S&P reveals global credit outlook for 2018]