Australia’s house price through the roof era is coming to an end: Reuters poll

Residential properties line the Sydney suburb of Birchgrove in Australia, August 16, 2017. REUTERS/Steven Saphore

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BENGALURU, Sept 5 (Reuters) – House prices in Australia will fall sharply this year and next as rising mortgage rates and cost of living pressures weigh on demand, a Reuters poll shows. , but for many people, buying a home will still remain out of reach .

Pandemic-related stimulus and cheap loans have nearly doubled house prices since the 2007-2009 global financial crisis, boosting homeowner wealth, but it has also prevented millennials and first-time buyers from property scale.

After rising by about a third during the pandemic, home prices fell 1.6% nationally in July. It was the biggest monthly decline since 1983 and dragged annual price growth to 4.7%, after peaking above 21% at the end of last year.

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Average house prices are expected to fall 6.5% this year, according to a report published from August 15 to September 15. 2 Reuters survey of 10 real estate analysts, versus an expected 1.0% rise in a May poll.

A further decline of 9.0% was expected next year.

“The housing boom is well and truly over as soaring mortgage rates cut the rug out of it,” said Shane Oliver, chief economist at AMP.

“There are three reasons why this downturn is likely to be deeper and the recovery slower than in previous cycles: high household debt levels, high house prices relative to income levels, and the end of the recession. long-term downward trend in interest rates.”

The Reserve Bank of Australia (RBA) has already raised rates by 175 basis points since May and is expected to raise them another half point on Tuesday in a bid to contain soaring inflation.

Markets are betting that the current spot rate of 1.85% could be close to 4.0% by the middle of next year. Banks have sharply increased borrowing costs for new fixed-rate mortgages and tightened lending standards.

“The path of interest rates will dominate the housing outlook. A sharp rise in mortgage rates between May and the end of this year will weigh heavily on property prices,” said Adelaide Timbrell, senior economist at ANZ.

“Still, a substantial correction is needed to bring housing affordability and housing prices back to fair levels.”

It will also be a bigger challenge for some of the most indebted households in a country, which currently has a record outstanding 2 trillion Australian dollars ($1.4 trillion) in mortgage debt.

ANZ, Bank of Queensland, Capital Economics and Knight Frank said average house prices are expected to fall 10-35% – roughly the amount of the fall in US house prices during the global financial crisis – to make Australian housing affordable.

Property prices in Sydney, the world’s second most expensive property market after Hong Kong, and Melbourne are expected to fall 7.0-10.0% this year and 7.0% next year.

(For more stories from Reuters Quarterly Housing Market Surveys:)

($1 = 1.4686 Australian dollars)

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Reporting by Vivek Mishra; Poll by Devayani Sathyan, Arsh Mogre and Anant Chandak; Editing by Hari Kishan, Ross Finley and Kim Coghill

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