Recent reports seem to unanimously suggest that Australia’s housing boom is coming to an end, however it appears it will be a soft landing rather than a property market crash, according to HSBC's chief economist for Australia, Paul Bloxham.
He suggests that "a hard landing is possible, but we believe this would require a negative shock from abroad and a sharp rise in the unemployment rate. We do not see a significant local housing imbalance and view Australia as having had a housing boom rather than having a housing bubble."
House prices in Sydney and Melbourne were growing at low double digit annual rates over the past five years, however during the past six months Sydney prices fell an average of 1 per cent and Melbourne’s annual price growth slowed to 7 per cent.
Mr Bloxham said the slowdown in Sydney and Melbourne was driven by increased supply but many vendors aspiring to inflated prices, higher lending rates for investors, wary buyers and a retreat in foreign demand, which had softened partly due to lending constraints by domestic banks and higher local taxes. HSBC revised down its forecasts for Sydney and bumped up 2018 predictions for Melbourne, given recent trends and changes in population growth estimates.
In spite of all the stresses and pressures in the market, Mr Bloxham said Sydney housing prices were tipped to grow by 2 to 4 per cent during 2018, while growth was expected to be between 7 and 9 per cent in Melbourne.
The softening of market value growth around the country will offer some relief to buyers who have been struggling with ever-increasing house prices in most major cities. But the good news for sellers is that there’s no need to panic. CoreLogic's Hedonic Home Value Index showed that in November there was an average of just 0.1 per cent fall in capital city dwelling values but this was offset by a 0.2 per cent rise in regional values.
By its very nature, the housing market will always have ups and downs. Property identity Mark Bouris reminds us that property value is influenced by market sentiment, interest rates and economic data. While you can’t control these factors, you can control your investment timeline. He suggests viewing property investment in 10-year windows and trying to buy well.