Soaring Australian house price inflation will fall next year: Reuters survey

© Reuters. File photo: A row of newly built apartment buildings was seen in the suburb of Epping, Sydney, Australia on February 1, 2019. REUTERS/Tom Westbrook

Author: Vivik Mishra

Reuters Bangalore-A Reuters survey found that Australia’s soaring house price inflation rate will decline next year and 2023, but house prices in one of the world’s hottest real estate markets are expected to still rise.

In response to the economic slowdown caused by the pandemic, the Reserve Bank of Australia lowered interest rates to the lowest level in history and injected a large amount of cash into the financial system-a powerful stimulus to the real estate market that has almost doubled house prices since the global financial crisis . 2007-09.

The real estate boom is a windfall for existing homeowners, but it has left many people unable to afford housing, which has widened the gap between those who have a large amount of home equity and those who are struggling to deposit a down payment to climb the property ladder.

“The Australian real estate market is in the twilight of an incredible prosperity driven by record low mortgage rates. Given that residential prices in most capital cities are still rising rapidly, the amazing price increase is not over yet,” said Gary Garley, the principal. Selder said he studied Australian economics at the CBA.

According to a Reuters survey of 11 real estate analysts from November 18th to 24th, housing prices are expected to slow to 6.0% next year after a surge of 18.0% this year. These estimates are basically the same as the August polls.

However, the rate of house price surges in 2023 and 2024 is expected to slow down significantly to 2.0%, roughly matching core consumer price inflation.

Four analysts predict that house prices will fall completely in 2023, ranging from -2.5% to -10.0%.

“We expect house prices to correct by about 10% in an orderly manner in 2023. The extent of the price correction will largely depend on the speed and magnitude of the increase in the cash interest rate by the Bank of Australia,” CBA’s Aird added.

When asked what will have the greatest impact on housing prices next year, six of the nine real estate market analysts said that interest rates have risen or monetary policy has tightened. The remaining three mentioned supply constraints, reduced immigration, and macroeconomic policies.

Eight analysts who answered follow-up questions about how many basis points a rate hike would significantly slow down the real estate market activity gave a median forecast of 100, with a forecast range of 25-400 basis points.

“If the Reserve Bank of Australia raises interest rates by nearly 200 basis points, as the financial markets have been expecting until recently, household debt servicing burdens will hit a record high, and housing will become the most unaffordable since the global financial crisis,” economist Marcel · Tilliant (Marcel Thieliant) said. Capital economics.

“This will slow the recovery of consumption and may bring huge headwinds to the real estate market.”

According to the latest economist survey by Reuters, the Bank of Australia’s cash rate will not rise from the historical low of 0.10% until 2023.

But for most first-time buyers, affordability is a growing problem, because prices have far exceeded their affordability. Of the 9 analysts who answered questions about affordability in the next 2-3 years, 6 said that the situation will get worse. The remaining three said that it would improve.

Adelaide Timbrell, senior economist at ANZ Bank, said: “Affordability constraints are increasing, the number of newly listed houses has increased significantly, macro prudential tightening and rising mortgage interest rates will limit lending in the next year.”

“Although returning to immigration in 2022 will be an advantage, these negative effects may offset this positive effect.”

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