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Market Turning – May 2017

Analysts from major banks and industry bodies seem to have some differing opinions on where Australia’s property market currently stands. Analysts from investment bank UBS are calling the top of the market, predicting that the boom could finally be about to turn.

With heightened concerns from the Reserve Bank and retail banks steadily increasing lending rates (the Commonwealth Bank lifted again in April), some now believe the pinnacle has been reached. In a recently published UBS analysis, the bank is effectively “ringing the bell” and “calling the top” for both activity and house price growth.

“While the historical trigger for a housing downturn [being RBA hikes] is missing, mortgage rates are rising and sentiment of home buying collapsed to a record low,” according to UBS economists Scott Haslem, George Tharenou and Jim Xu. “Looking ahead, price growth has likely now peaked, and we see a moderation ahead amid record supply and poor housing affordability. We are ‘calling the top’, but stick to our forecasts for commencements to ‘correct but not collapse’.” The analysts did note however that they did not think there would be a price crash because of the lack of RBA rate hikes.

Other analysts such as CoreLogic-Moody’s have forecast marginal price falls beginning next year. Louis Christopher from SQM Research said it was far too early to tell and required ongoing information on four key areas including a more definite trend in clearance rates, total listing levels, house finance data (which has continued to show growth) and asking prices.

“Before we call any slowdown we would want to see clearance rates fall into the 60 per cent range, then I would start to pay serious attention,” Mr Christopher said, “I think we need a lot more information.”

A summary of all of this might reflect that while Australians are still living in an era of relatively low interest rates some price growth is inevitable, although there are massive parts of Australia which have not seen price growth since the GFC. That makes creating a national housing policy to effectively and fairly manage the many disparate markets virtually impossible.

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