ANZ predicts property growth will slide to 1pc before rebounding in 2019

Duncan Hughes| Australian Financial Review| 10 January 2018

http://www.afr.com/real-estate/anz-predicts-property-growth-will-slide-to-1pc-before-rebounding-in-2019-20180109-h0g02x

Residential property growth will slide to around 1 per cent in the second quarter of this year before rebounding to about 4 per cent in 2019, according to Australia and New Zealand Bank.

Annual growth this year will be about 2 per cent but the slowdown is “unlikely to persist”, according to its analysis.

ANZ’s longer-term market review looks beyond auction clearance rates, which are a useful insight for assessing demand, into economic drivers such as employment, the economy and interest rates.

“Our forecasts are consistent with our expectations that national housing price growth will continue to slow in 2018, though only moderately and without falling into negative territory,” according to the bank.

ANZ and National Australia Bank each account for about 15 per cent of the nation’s mortgage loan book. Commonwealth Bank of Australia and Westpac Group have a combined share of nearly 50 per cent.

Most of the nation’s housing market has risen strongly during the past five years. Prices in Melbourne and Sydney rose 35 per cent and 30 per respectively during that period.

Lenders are tightening terms and conditions for borrowers, particularly investors, and raising some rates in response to regulatory measures imposing speed limits and caps on growth. There is also the prospect that rising overseas rates could force the Reserve Bank of Australia to raise the cash rate from an historical low of 1.5 per cent.

An increase in the number of apartments and fall in Chinese buyers is also helping to slow price growth.

Other banks and forecasters also argue outsize gains in Sydney and Melbourne are unlikely this year but there is disagreement about the direction of the market.

House prices softened in December in Melbourne and Sydney as the property boom continued to deflate, which creates opportunities for first-time home buyers, according to analysis by AMP Capital, which expects prices in the nation’s two largest cities to this year fall by about 5 per cent.

“But other cities are running their own cycles,” said AMP chief economist Shane Oliver.

Hobart is expected to continue strengthening, Perth and Darwin are close to the bottom, and moderate growth is likely in Adelaide, Brisbane and Canberra, he said.

Banking giant HSBC is expecting prices to this year rise by between 3 and 6 per cent. Investment bank TD Securities is tipping rises of between 4 and 5 per cent while ratings agency Moody’s Australia is tipping 4 per cent.