© Reuters. FILE PHOTO: A tradesman works on the roof of a house under construction in a housing estate in Sydney’s western suburbs of Oran Park, Australia October 21, 2017. Picture taken October 21, 2017. REUTERS/David Gray
By Vivek Mishra
BENGALURU (Reuters) – House prices in Australia, which have fallen sharply, are set to fall further next year, according to a Reuters poll of analysts who forecast a 16% drop from peak to trough, more than double the correction in fiscal year 2008. crisis.
Near-zero interest rates and a housing shortage have driven home values across Australia up 25% during the pandemic, boosting homeowners’ wealth, but it has kept many first-time buyers off the ladder of the property.
However, the Reserve Bank of Australia (RBA) has raised interest rates by 275 basis points this year to a nine-year high of 2.85% and is expected to add another quarter point in December. Markets are pricing it to reach 4.00% by the end of June.
It hit property prices, prompting the RBA to downgrade to lower rate hikes amid fears aggressive tightening could sharply reduce household spending in an economy where much of the wealth is tied up to housing.
House prices in Australia have nearly doubled since the financial crisis, but the boom has led to a buildup of household debt that could become a risk to financial stability.
Although average house prices have fallen 6.5% from a peak late last year, with the losses spreading to all state capitals, they are still well above pre-Secondary levels. pandemic.
“We expect housing to fall by 15-20% and that should be seen as an orderly descent,” said Adelaide Timbrell, senior economist at ANZ.
“Strengthening immigration-driven population growth, as well as favorable labor market conditions will be protective factors against a faster price decline or a crash. »
Estimates of a peak-to-trough correction were in a wide range of 13% to 28% in the Nov. 9-24 Reuters poll, underscoring the uncertainty.
On a calendar year basis, the poll showed average home prices fell 7.3% this year and 9.0% in 2023. The estimate for next year remained unchanged from to a September poll.
While lower house prices would help improve affordability, it would be a bitter pill to swallow for recent homeowners, seeing their capital dwindle and facing higher repayments as interest rates rise.
“It is crystal clear that the RBA is now focused on the evolution of the housing market. And their tightening cycle from here will determine how much further home prices will go,” said Gareth Aird, head of the Australian economy at the CBA.
AMP (OTC:), ANZ, Knight Frank and Macquarie said average house prices would need to fall between 25% and 45% to make Australian housing affordable.
“A substantial reversal would be needed to make homes somewhat affordable,” added ANZ’s Timbrell.
Property prices in Sydney – the world’s second most expensive property market after Hong Kong – and Melbourne are expected to fall 6.0-6.5% next year after falling 12.0% and 8 .5% this year, respectively.
In Brisbane, Adelaide and Perth, they are expected to fall by 7.0%, 6.5% and 5.0% respectively next year.
For other articles from Reuters Quarterly Housing Market Surveys: