AUSTRALIAN HOUSING BOOM MAY END
"The unwinding of housing market tensions to date may presage dramatic and destabilizing developments, rather than herald a soft landing," the OECD's report warned.
Australia could be confronting a "dramatic and destabilizing" end to the housing boom, according to the Organization for Economic Cooperation and Development.
Sydney’s housing boom is coming to a termination, as curbs on investor lending and a number of new developments combine to depress prices, according to QBE Insurance Group Ltd.
After gushing 56 percent in the past four years, the median house price in Australia’s biggest city is forecast to stay almost uniform in the next three years, QBE said in its annual housing outlook released Thursday. Sydney apartment prices are seen falling 6.8 percent by June 2019, as decelerating rental and price growth dries up investor enthusiasm for property.
The housing boom has been fired by record-low interest rates, a burgeoning population and a shortage of supply, barring young people out of the market. Banks have tightened affording criteria for property investors after regulators pressure to deter the price rise, and some state governments have imposed stamp duty surcharges on overseas buyers.
“Prices are estimated to moderate through the three years to 2019, which is likely to be positive for housing affordability,” said Phil White, chief executive officer of QBE Lenders’ Mortgage Insurance. “It’s likely owner-occupiers, including first home buyers, will be stepping in to pick up some of this opportunity in the market.”
In Perth, which has been hit hardest by the decline in mining investment, the average house price by 2019 is projected to be 10 percent below its 2014 peak.
Brisbane home prices are seen resisting the drift, with QBE saying a lack of new supply will push prices up 6.5 percent.
Australian fixed-income investors now refer to the scene of a housing market downturn as their biggest concern, replacing the risk of a hard landing in China’s economy, according to a survey released Thursday by Fitch Ratings.
Yet, only 4 percent of those surveyed expected fall in prices more than 10 percent by mid-2019, Fitch said. Investors also acknowledged property-market exposure as the greatest risk to bank credit quality over the next year, with hypothecations making up almost two-thirds of the major Australian banks’ loan books.
Though there seems no indication that the boom is going to end. House prices in Sydney are up 14 percent this year through September, as compared to 9 percent across the nation’s foremost cities, according to CoreLogic Inc., for still a lack of houses for sale in and around the city.
Fewer investors are inflowing the market after banks tautened lending to landlords, the QBE report said. Investors accounted for 44 percent of housing loans in the 12 months ended June 2016, down from 51 percent in 2015, QBE said.
Separate data released Wednesday showed up investor interest not to be fading yet. Investor lending has rallied 10 percent since April, having slumped 18.5 percent over the previous 12 months, CoreLogic said.