Invest
How house prices will be affected under Scott Morrison
One of the nation’s top economists has revised his house price predictions in light of a Coalition victory. Here’s what his property roadmap looks like for the nation’s investors.
How house prices will be affected under Scott Morrison
One of the nation’s top economists has revised his house price predictions in light of a Coalition victory. Here’s what his property roadmap looks like for the nation’s investors.
AMP chief economist Shane Oliver said the combination of Labor’s negative gearing plans not coming into effect, a cash rate cut likely for next week, Mr Morrison’s promised financial help for first home buyers and the banking regulator relaxing its 7 per cent interest rate test points to house prices bottoming earlier and higher than previously expected.
Mr Oliver now anticipates capital city average house prices to have a top-to-bottom fall of 12 per cent – 10 per cent of which is already done – rather than 15 per cent.
Further, he expects prices to largely hit their floor at the end of the year.
A return to boom time?
However, given the still poor affordability, high debt levels, tighter lending standards and rising unemployment, a quick return to the boom time is unlikely.
Simply put: the fall has been big, and it will take a while to recover.
According to CoreLogic data, the fall in dwelling prices in capital cities are down 9.7 per cent from the highs of September 2017. With this, the total fall in value is the worst in 40 years, with Darwin (28 per cent), Sydney (15 per cent) and Melbourne (11 per cent) being the hardest hit.
How we got here
According to Mr Oliver, a range of pricing and economic factors caused the downturn:
- Firstly, a correction to the huge surge in 2017, where properties where overvalued and mortgagees were left with high debt
- The end of the mining booms in 2014 for Perth and Darwin
- Tightening lending standards that cracked down on lending to investors and interest-only loans
- A surge in supply of units in the major capitals
- 80 per cent collapse in foreign demand
- A big pool of interest-only borrowers switching to principal and interest loans
- Price fall feeding on themselves with a fear of not getting out of the market driving down the price
- Investors started to fact in the probability of Labor victory, which would restrict capital and capital gain taxes, meaning another 5 to 10 per cent could fall
Recent wins for the property market
While the drags remain significant, several positives have become apparent over the last few weeks. Mr Oliver believes these will help stabilise the market:
- First home buyers are now on the way as the government’s First Home Loan Deposit scheme takes effect.
- Secondly, APRA is lowering the 7 per cent mortgage buffer making it easier to access capital.
- The RBA governor has all but confirmed that rate cuts are on the way.
- The threat to changes to negative gearing and CGT is gone with a Morrison government victory.
The influence of unemployment
The main risk is that Australia slides into a downwards spiral as the housing downturn and global slump trigger a surge in unemployment, which by default spikes housing prices. According to Mr Oliver, ultimately, this could cause a 30 per cent plus falls in the national property prices.
AMP predicts that 60,000 jobs will be lost due to the housing downturn. However, a number of factors, including infrastructure spending, resources investment are near the bottom, non-mining investment looking strong and tax cuts for low and middle-income earners, should cap unemployment at less than 6 per cent.
This email address is being protected from spambots. You need JavaScript enabled to view it.
About the author
About the author
Property
Property prices boosted by housing policies: RBA
The central bank has outlined the “pervasive” impact that policy has on property. ...Read more
Property
Labor’s ‘Help to Buy’ scheme not without its risks
With Anthony Albanese sworn in as Australia’s 31st PM, home buyers are excited at the prospect of accessing the new ‘Help to Buy’ scheme, but a property expert has warned that the risks may be g...Read more
Property
Australia's housing market is entering a ‘broad-based correction phase’
Westpac believes the housing market downturn is now underway. ...Read more
Property
ANZ now expects house prices will end the year lower
With higher interest rates on the horizon, the bank is forecasting larger house price declines than previously expected. ...Read more
Property
Which capital cities are most attractive to property investors?
A new survey has suggested that investor attention is shifting away from Australia’s two largest capital cities. ...Read more
Property
Market uncertainty fails to discourage foreign property investors
While interest from foreign investors in Australian property has remained strong, HLB Mann Judd warned that tax increases could see demand shift to other markets. ...Read more
Property
Regional renters forced to spend more of their income than ever before
Renters in regional areas are spending nearly as much on rent as home owners are spending on mortgage repayments. ...Read more
Property
Aussie home buyers now need to save for over 11 years for a deposit
Since early 2020, the time needed to save for a deposit has increased by more than two years. ...Read more
Wrapping up an eventful 2021
Listen now
What Omicron means for property, and are units right for first-time buyers? What is equity crowdfunding? Are industry super funds tapping into member funds to save their skins?
Listen now
Will housing affordability improve in 2022? Will buy now, pay later become the norm? Why are Aussies staying in failing super products?
Listen now
Who really benefits from crypto ETFs? How will the RBA respond to rising inflation? Could a mandate help address unpaid super?
Listen now
Property
Property prices boosted by housing policies: RBA
The central bank has outlined the “pervasive” impact that policy has on property. ...Read more
Property
Labor’s ‘Help to Buy’ scheme not without its risks
With Anthony Albanese sworn in as Australia’s 31st PM, home buyers are excited at the prospect of accessing the new ‘Help to Buy’ scheme, but a property expert has warned that the risks may be g...Read more
Property
Australia's housing market is entering a ‘broad-based correction phase’
Westpac believes the housing market downturn is now underway. ...Read more
Property
ANZ now expects house prices will end the year lower
With higher interest rates on the horizon, the bank is forecasting larger house price declines than previously expected. ...Read more
Property
Which capital cities are most attractive to property investors?
A new survey has suggested that investor attention is shifting away from Australia’s two largest capital cities. ...Read more
Property
Market uncertainty fails to discourage foreign property investors
While interest from foreign investors in Australian property has remained strong, HLB Mann Judd warned that tax increases could see demand shift to other markets. ...Read more
Property
Regional renters forced to spend more of their income than ever before
Renters in regional areas are spending nearly as much on rent as home owners are spending on mortgage repayments. ...Read more
Property
Aussie home buyers now need to save for over 11 years for a deposit
Since early 2020, the time needed to save for a deposit has increased by more than two years. ...Read more
