"Cooling Not Crashing": HSBC Forecasts House Price Growth of 3-6% in 2018

Growth in house prices is slowing, particularly in Sydney and Melbourne, but the market is headed for a soft landing, says HSBC.

The Australian property market is ‘cooling not crashing’ according to HSBC’s latest Downunder Digest.

HSBC is forecasting nationwide property market growth of 3-6 per cent in 2018, an outcome that will deliver the much-hoped-for soft landing.

“We do not expect a sharp decline in housing prices,” said the report.

With Sydney prices down 1.3 per cent in the last quarter, according to the latest CoreLogic data, and Melbourne prices rising only 0.5 per cent in November, growth in Australia’s largest property markets is slowing.

“I think for housing in inner-city Melbourne, growth will be between 5 and 10 per cent in 2018,” Jeremy Fox, of RT Edgar Toorak, told SCHWARTZWILLIAMS.

“It’s a bit softer in the apartment market,” he said.

Fox said that growth below 10 per cent was slightly below the average rate of annual growth.

Fox said the market boomed in recent years.

“It’s been a boom driven by low interest rates, a pick up in the economy, people arriving in Australia, and government policy,” he said, adding he expects those conditions to remain stable in 2018.

According to the HSBC report, the slowdown in Sydney and Melbourne has been driven by the increase in housing supply, tighter prudential settings, which have dampened investor demand, and weaker foreign buying.

Foreign demand “comes in waves”, said Fox, who explained that his office will sometimes not get an enquiry for weeks, and will then receive a flood of enquiries.

Chinese restrictions on capital outflows, Australian banks’ tighter lending rules for foreign nationals, and higher taxes on foreign buyers are all likely to weigh on foreign demand for local property in 2018, according to HSBC.

HSBC said that even though it expects the RBA to slowly begin lifting interest rates in 2018, APRA could loosen prudential settings if the housing market slows.

SOURCE: The Real Estate Conversation
POSTED: December 12, 2017

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"Cooling Not Crashing": HSBC Forecasts House Price Growth of 3-6% in 2018