Australia’s Housing Market Expected To Slow Down

Australia’s Housing Market Expected To Slow Down January 24, 2015


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After showing massive strength in the last couple of years, it seems that Australia’s housing market is likely to cool down soon. According to research house Alliance Benstein, the country’s housing boom, which has seen Sydney home prices grow by 30% over the last two years, is on the cusp of a cooling period and a housing correction is expected to occur over the next year.
Guy Bruten, Alliance senior economist for the Asia-Pacific region, believes that these changes are likely to happen in the coming months.

Mr Bruten wasn’t alone in this belief. His statement added to a growing number of economic researches suggesting that the country’s housing market is bound for a slowdown. Last week, a report released by global ratings agency Fitch Ratings showed that the growth of Australian home prices is at 4% this year, down from 7% in 2014.

The findings of Fitch Ratings, which reflect Alliance’s research, also revealed that Perth’s housing market has grounded to a halt. Price growth in Sydney and Melbourne, on the other hand, is expected to slow down to 3%-4% this year.

The latest data released by the Australian Bureau of Statistics regarding the Australian property market also seemed to match the report by Alliance and Fitch Ratings. According to ABS, Melbourne’s property prices rose by just 1% during the September quarter, down from 1.3% from the June quarter. Sydney’s property market, meanwhile, recorded a 2.7% increase in the September quarter. Although the increase is almost three times bigger than in other capital cities, it is still significantly lower than the 3.1% growth recorded during the June quarter.

Meanwhile, the Australian economy added 37,000 jobs in December 2014, pushing the country’s unemployment rate down to 6.1%. However, Mr Bruten warned everyone that it “would be unwise to be swayed by this data.” He explained that with the deteriorating mining and manufacturing sectors, it is very unlikely that the recent positive employment figures will remain for an extended period of time.

Instead of going to a more positive direction, Mr Bruten said that employment figures are likely to decline further due to the impact of the falling oil prices on the Australian liquid natural gas export market. “To be clear, there’s no suggestion that the [LNG] projects already well underway will be cancelled. But their profitability has been curtailed, and any new projects are most likely non-viable at the lower price,” he said.

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