Predictions show house prices set to cool down this year

Sue Lannin| ABC| 25 February 2016

http://www.abc.net.au/news/2016-02-25/house-prices-to-cool-down-in-2016-predictions-show/7201252?section=business

Home prices will cool down in 2016 after double-digit rises in some capital cities for the past two years, a new report by CoreLogic and Moody’s Analytics predicts.

But the forecasters said a rapid rise in unemployment in Australia and a hard landing in China could lower their predictions and hit prices.

The forecasters have released a new home value index which predicts home prices every quarter for the next 10 years.

Moody’s Analytics chief international economist Ruth Stroppiana said weak growth in wages and more homes being built would keep a lid on home prices this year.

But she expected the slowdown in prices would be a “healthy correction” and not a price crash.

Ms Stroppiana said a big fall in house prices was only possible if there was an economic shock such as a global recession, a large rise in unemployment in Australia or a sharp slowdown in the Chinese economy.

Moody’s Analytics economist Alaistair Chan said possible changes to negative gearing could also impact home prices.

The report said home prices rose 9.1 per cent nationally in 2015, but the pace of price rises is expected to drop sharply in 2016 to 3.6 per cent with prices forecast to rise 2.7 per cent in 2017.