Australian property prices headed for "prolonged" flatness

Property Observer

Australia’s national house price growth is likely to be flat – or possibly in low single digits – for the several years, according to UBS.

The latest UBS report, ‘Get rich or borrow trying‘, warns that even small changes to credit conditions, such as a drop in availability of investor-only loans which have been targeted by the bank regulator, will “materially impact” house price growth.

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According to UBS households are much more sensitive to tightening financial conditions from higher mortgage rates and the lagged impact of macroprudential measures than many realise.

House price growth should moderate to around 7 per cent in 2017 and to between 0 per cent to 3 per cent in 2018, according to UBS economists George Tharenou and Carlos Cacho.

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But the “forever boom” is ending, UBS clients were told, according to The Australian.

“We would still characterise our outlook as a ‘soft landing’, given we still don’t expect a sudden collapse in prices,” they wrote in a report on Fairfax Media.

“But it does seem likely that Australia faces a prolonged multi-year period of flat or low single digit nominal price growth.”

Signs of a slowdown in house price are fast-emerging. House prices in Sydney fell 0.1 per cent over September, the first fall since late 2015, on Corelogic figures and 1.9 per cent, on Domain figures.

Veteran analyst Louis Christopher is predicting sedate house price growth in Sydney of between 4 per cent to 8 per cent in 2018 if the cash rate and economy remains unchanged.