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Property price growth slows in July, but will this downward trend last?
Despite the impacts of lockdowns on the broader economy, the housing market continued to grow in July, albeit showing signs of an impending slow down, new data has revealed.
Property price growth slows in July, but will this downward trend last?
Despite the impacts of lockdowns on the broader economy, the housing market continued to grow in July, albeit showing signs of an impending slow down, new data has revealed.
Stats released by CoreLogic showed that Australian home values have risen by 1.6 per cent in July.
In fact, the national home value index has increased over 14 per cent, representing the fastest annual growth since February 2004.
Spurred on by record-low interest rates, AMP Capital’s chief economist, Dr Shane Oliver, opined that the apparent slowdown might only be temporary.
“The lockdowns in Sydney and various other cities for shorter periods may be impacting, but it’s hard to discern as the slow down in price gains is no more than we were expecting before the latest round of lockdowns began, and price growth and clearances are still very strong,” he said.
Dr Oliver noted that the market remained resilient due to a number of key economic factors working in its favour.
However, he noted that ultra-low mortgage rates, ongoing government incentives and an ongoing relatively low level of homes for sale will help the market grow despite lockdowns.
Dr Oliver also pointed out that the resumption of economic and jobs market recovery once lockdowns end, and increased vaccination rates, will eventually allow for further home price increases ahead.
While the property market shows signs of cooling, CoreLogic’s research director, Tim Lawless, stressed the resilience the property market has demonstrated amid lockdowns.
In fact, the last figures released by the ABS showed wage growth was at 1.5 per cent for the entire year, trailing the July growth in property prices.
“With dwelling values rising more in a month than incomes are rising in a year, housing is moving out of reach for many members of the community,” he said on Monday.
The property expert pointed out that this has an impact on what Australians can afford, which could lead to lowering price growth moving forward.
“Along with declining home affordability, much of the earlier COVID-related fiscal support (particularly fiscal support related to housing) has expired,” he continued.
However, he opined that demand as well as the current macro environment are all strong tailwinds.
Dr Oliver largely agreed, forecasting strong growth for the remainder of this year before it tapers off in 2022.
“With average home prices already up by 14 per cent year to date, and allowing for some additional slowing in home price gains in the next month or so as a result of the lockdown, average capital city home prices are still likely to be up by around 20 per cent this year,” he said.
Moving forward, though, AMP believes there will be “a sharp slowdown to just 5 per cent price growth through next year”.
“And our base case remains that 2023 is likely to see the start of another cyclical downturn in property prices as the interest rate cycle starts to move up more decisively, and we are expecting a -5 per cent fall in house prices that year, although there is a risk that the hit to the economic outlook if lockdowns are extended drives this into 2024,” Dr Oliver concluded.
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