Economists from HSBC have joined calls that Australia’s house market boom is reaching an end, predicting a moderation in house price growth to single digits in the coming quarters.
In the bank’s most recent Downunder Digest, Australian housing: Cooling Not Crashing, chief economist Paul Bloxham and economist David Smith write that slowdowns in the Sydney and Melbourne housing markets will continue to weigh in on national house price growth for the next few quarters.
“[We] retain our forecast that national housing pricing growth will slow from the double-digit rates of recent years to 3-6% in 2018,” the economists said.
They expect house price growth to be between 2-4% in Sydney and 7-9% in Melbourne for the upcoming year. In other cities, low single digit rates are expected.
Bloxham and Smith attribute cooler property markets in Sydney and Melbourne to increased housing supply through greater volumes of apartment construction, tighter prudential lending regulations, and a crackdown on foreign investors both locally and within China.
HSBC does not expect a sharp decline in house prices however, with a hard landing only caused by an unexpected shock from overseas or a steep rise in Australia’s unemployment rate.
Sudden changes from within the country are also off the table, the economists predicted.
“Although we see the RBA beginning to lift its policy rate in 2018, we expect only a slow pace of cash rate tightening and some relaxation of current tight prudential settings as the housing market cools.”
Overall, past upward trends of house price growth have been more boom than bubble, they wrote.
