Statsnack: housing out of puff

A soft outlook for economic growth, ongoing job security concerns and sluggish household income growth will likely moderate house price growth in Australia during 2015.

This week’s national accounts data showed Australian economic growth remains weighed down by the combined headwinds of a sharp slowdown in mining expenditure, soft employment and wages growth and sluggish consumer spending and business investment.

"A soft outlook for economic growth, employment and household income will moderate the Australian housing market and home price growth in 2015."
ANZ Research

In contrast the Australian housing market has enjoyed a positive 2014 buoyed by strong population growth, an extended run of low mortgage rates and a strong underlying appetite for home ownership. 

Nonetheless the housing market cycle often reflects broader underlying economic conditions as illustrated by comparing house prices to long-term mortgage affordability benchmarks. 

As a result ANZ Research expect a soft outlook for economic growth, employment and household income to lead to a moderation in the Australian housing market and home price growth in 2015.

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Low interest rates, increasing home prices and strong population gains have supported housing construction for the past 12 months, particularly in Sydney and Melbourne. 

The long time-lags from approval to completion of high-rise apartment construction are expected to prolong the current cyclical upturn in housing construction compared to previous cycles. 

ANZ Research expects APRA will introduce some form of policy tightening in the coming months to dampen investor lending, particularly in New South Wales. 

The recent report on foreign investment in Australian housing did not result in any direct changes to Australia’s foreign housing investment policy but it did provide recommendations to improve enforcement and compliance with the existing policy.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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