Australian Housing Downturn Expected to Last Years
Following 11 consecutive months of housing price decline, forecasters are predicting the trend will continue for years.
Now, UBS's Australian economics team has indicated the housing downturn may continue for years to come.
“We’ve long expected the value of home loans to drop by a cumulative 20 percent, which is the main driver of home prices, which consequently will likely fall 5 per cent plus,” Economist at UBS George Tharenou told Business Insider.
“We expect further credit tightening, and the RBA’s lack of willingness to cut rates this time, to see the longest house price downturn in decades.”
Figures released by CoreLogic earlier this week indicated Aussie home prices are likely to fall again in September, marking an entire year of consecutive decline.
The forecast continues a conversation home owners and potential buyers are familiar with.
In May, Westpac joined other industry analysts including AMP Capital, the Commonwealth Bank and Morgan Stanley with their prediction Australian capital city house prices will continue to fall for some time to come. The bank forecast house prices could fall "up to 10 percent over the course of the next two years," led by the Sydney and Melbourne markets.
Westpac's latest weekly update continued down this line of prediction, stating the decline in Sydney and Melbourne is expected to persist through "the remainder of 2018, 2019 and well into 2020."
There are several elements contributing to the price decline across the country, with tighter lending standards at the forefront.
Property expert Robert Klaric, who predicted the end of the property boom ahead of many market commentators, told ten daily the changing lending principals of the banks is a critical aspect of the market adjustment.
"It's harder to get the mortgages from the banks to purchase property," Klaric said. "Whether you're an investor or a homeowner the banks are scrutinising every loan application, so not everything is just being approved as it was a couple of years ago."
The purse strings of banks were only tightened as revelations of some irresponsible lending came to light during the Banking Royal Commission earlier this year.
The potential outcome of the decline is a mixed bag of negative and positive ramifications, Klaric said.
"Where you’ll see the pain is in the areas where people have bought properties in the past couple of years," he said.
"They’ve sort of entered the escalator at the top of escalator as opposed to the bottom...and they may end up with negative equity in their house."
As for first home buyers, the hope of a potential in to the property market may become less of a pipe dream, as it was when facing the booming prices over recent years in hot spots such as Sydney and Melbourne.
"It'll actually, in the next 12 months, potentially be a platform for the first home buyers to get in," Klaric explained. "I think the opportunity presents itself for first home buyers to enter that market probably within 12 to 18 months down the track."