Australia house prices not headed for a crash, UBS

17 Jul 2017

Sydney, Australia


With dwelling unit commencements in Australia down 19 percent year-on-year in Q1 2017, UBS economists are increasingly confident that a correction in the residential sector is “unfolding”, reported The Sydney Morning Herald.

In a report to clients, Scott Haslem and George Tharenou even described house price growth in Australia as “unsustainable.” Despite this, they do not expect house prices to crash.

This comes as the annual rate of house price growth are expected to slow further from a capital city average of around 10 percent in the year to June to seven percent by year-end. By 2018, house prices are expected to grow by zero to three percent.

“Under our base-case view of a ‘correction but not a collapse’, we see a ‘muddle-through’ outcome, which leaves the RBA holding the cash rate steady over the coming year,” said the report.

A slower pace of house building has also been highlighted in a Deloitte Access Economics report as a potential economic headwind, along with softer growth in China. However, the report called the slowdown as a “caveat” to an “otherwise solid outlook” for the Australian economy.

“The pace of home building is set to shrink further amid increasing evidence that gravity may soon start to catch up with stupidity in housing markets,” said the Access report.

“Relative to the rest of the rich world, Australia’s economic outlook may not be quite as impressive as it once was, but we are still kicking goals,” it added.

In fact, Melbourne and Sydney still registered an auction clearance rate of around 70 percent over the weekend, despite the drop in new lending to property investors and softer price growth in recent months.


This article was edited by Denise Djong.


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