ANZ Research believes building approvals are already moving past their peak and expect to see new housing construction fall around 10 per cent over the coming year.
Despite this, a large ($A40 billion) backlog of work will elevate residential activity for some time. However, ANZ Research expects to see residential investment easing modestly in the second half of 2018 and into 2019.
The tightening in credit availability and the associated weakening of the residential housing market do increase the economy’s vulnerability to additional shocks.
The combination of a global slowdown triggered by trade and tighter credit domestically could be particularly damaging for Australia’s economic prospects.
This suggests policy makers should be especially careful about adding to the downside risks.
Daniel Gradwell is Senior Economist and David Plank is Head of Australian Economics at ANZ