After five years of skyrocketing house prices in Sydney and Melbourne, property experts seem to think these markets’ boom days may soon be over.
Price growth expectations for the east coast property markets (New South Wales, Victoria, and Queensland) have dropped significantly, according to the latest ANZ/Property Council Quarterly Survey for September 2017.
The results differ radically from the June quarter, when respondents expecting house prices to continue to rise in the east coast capitals had hit an annual high.
In addition to the declining outlook for price growth in the east coast states, confidence from the 1,700 surveyed industry members also fell.
The decline was most significant in NSW, with the confidence index dropping from 145 to 139 over the quarter. (As a score of 100 is considered neutral, the final score is still considered positive.) Nationally, the confidence index dropped from 135 to 132.
“While national confidence is at elevated levels, the fall in confidence in our two biggest state economies of New South Wales and Victoria is a red flag that needs to be watched,” said Glenn Byres, chief of policy and housing at the Property Council of Australia.
ANZ’s analysis of the results pointed to tighter regulation from the Australian Prudential Regulation Authority (APRA), which has targeted property investors, as having a “negative impact on the industry.”
Data from the Australian Bureau of Statistics (ABS) showed that investor lending had shrunk 1.4% from April to May, hitting a nine-month low.
ANZ said the results didn’t “ring alarm bells” as confidence across most regions was still higher than it was a year ago, driven largely by improvements in the mining regions.
The survey’s results are in line with the expectations that were outlined in National Australia Bank’s Forward View economics note, which said that while the market “remains fairly resilient,” there were signs it had entered a cooling phase. NAB doesn’t anticipate a crash, as “trends to date remain consistent with an orderly unwind of market exuberance, rather than a sharp and painful correction”.
“Looming headwinds from prudential tightening, combined with rising housing supply, affordability constraints and modest wages growth … suggest the housing market will continue to cool from here – although an orderly conclusion to the long-running housing boom in major markets is still expected,” NAB said.
NAB’s forecasts had anticipated that national house prices would rise 7.2% in 2017 and 4.3% in 2018, while apartment prices would rise 6.8% this year before dropping 0.4% in 2018.
These projections are “likely to be revised lower” this week, according to NAB.
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