The risks faced by Australia’s housing market may have lessened recently, but one global economic body believes there is still a real possibility of a market collapse.
In its latest economic outlook report the Organisation for Economic Co-operation and Development (OECD) states that “close vigilance on housing-market developments is still required” despite the fact that there are “receding risks” in the market currently.
While recent moderation of price growth in a number of markets across Australia has been heralded by some as a positive for market stability
, the OECD believes there is a strong chance the slowdown may not be an orderly one.
“Domestically, the unwinding of housing-market tensions to date may presage dramatic and destabilising developments, rather than herald a soft landing,” the OECD outlook said.
“Uncertainties on future economic policy ahead of the Federal election, which is scheduled for 2nd July, are also adding a degree of risk.”
Discussing the OECD report on his website, Martin North, head of Digital Finance Analytics, said he believes the OECD concerns mainly stem from current conditions in the Australian apartment market.
"We think the risks are centred on the high-rise apartment sectors, especially in the east coast urban centres. In our worst case scenario, prices may fall up to 38%, in Melbourne but not immediately," North said.
Concerns have also been raised recently about the state of play across Sydney’s apartment market
as well as that of inner city Brisbane
Though there are some concerns about market conditions going forward, the OECD report does have some good news, with it predicting the Reserve Bank of Australia won’t raise interest rates until at least 2017.
“The Reserve Bank reduced the policy rate by [0.25%] in May to 1.75%, the first rate change in 12 months, prompting a depreciation of the exchange rate.
“The projection envisages no further easing and assumes that policy-rate increases begin in 2017. Nevertheless, room for further rate cuts remains in the event of below-par growth.”
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