HSBC Cuts Forecast for Sydney and Melbourne Housing Prices


Tighter prudential settings, a pullback in foreign demand and a boost in housing supply has seen HSBC cut its house price forecast for Sydney and Melbourne.

The bank is forecasting Sydney property prices to fall by 3 to 5 per cent over 2018 and Melbourne to now gain by between 1 to 3 per cent.

HSBC had previously predicted in December a gain of 2 to 4 per cent for Sydney and a gain of 7 per cent to 9 per cent for 2018.

"We continue to expect a soft landing for the Australian housing market," HSBC chief economist Paul Bloxham said in a note released this week.

"In our view, housing prices are unlikely to fall sharply given continued low interest rates and strong employment growth."

"Although housing price growth has slowed in both cities, the auction clearance rates suggest a more buoyant market than implied by the housing price numbers.”

HSBC Cuts forecast for Sydney and Melbourne Housing Prices
MElbourne Housing04

Earlier this month property research group SQM revised its forecasts for Sydney house prices, predicting that they will fall by as much as 4 per cent in 2018, adjusted from its original housing price forecast of 4 to 8 per cent growth.

SQM also revised its Melbourne housing prices forecasts from its earlier prediction of 7 to 12 per cent growth to an expected fall of 3 per cent.

Commonwealth Bank senior economist said that the bank believes that housing prices will to continue to deflate over the next one-and-a-half years.

“Credit standards are likely to be further tightened, supply will continue to lift, mortgage rates are more likely to go up than down and buyer expectations have adjusted downwards from exuberance to more rational levels,” Aird said.

Brisbane, Sydney and Melbourne Housing Prices are forecast to fall says HSBC.
Housing 59

HSBC also said its Brisbane Housing Price Forecast is between a fall of 2 per cent and 0 per cent instead of a 1 per cent to 4 per cent gain, where growth of new housing supply is outstripping population growth and posing a risk.

Economist Saul Eslake wrote this week that government intervention has played a role in bringing about this halt to the previously inexorable rise in residential property prices.

“In particular, the Australian Prudential Regulation Authority’s move in March last year to curtail interest-only lending, coming on top of its earlier imposition of a 10% ceiling on the rate of growth in lenders’ investor loan books, has helped to slow lending to investors, from 49% of all mortgage lending in 2014-15 to 39% thus far in 2017-18.”

Eslake added that moderation in demand from foreign investors was more likely a consequence of tighter controls on capital outflows from Beijing than as a result of tax increases (and FIRB fees) imposed by government.

Macroplan executive chairman Brian Haratsis said: “The good news is that housing demand is likely to stay robust due to broad agreement of around 190,000 person levels of international migration.

“This will drive total population growth of 1.6 per cent in Australia but much higher in hotspots like Melbourne and Brisbane.”

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