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Capital growth to be ‘very subdued’ in 2016
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Capital growth to be ‘very subdued’ in 2016

James Mitchell 2 minute read

Australia’s housing market has been tipped to slow substantially, although talk of a sharp correction has been dismissed.

NAB Group Economics has reduced its forecast for detached house price growth in 2016 and highlighted growing risks in the apartment market due to a sharp increase in construction.

On a national level, NAB expects house prices to increase just two per cent in 2016, largely reflecting slower growth in Sydney and Melbourne.

“In an environment where income growth continues to be modest, alongside lower population growth, the rates of house price growth seen in Sydney and Melbourne are unlikely to continue, suggesting more modest price gains in 2016,” NAB said.

“Regulatory changes to address risks in housing credit, particularly investor credit, have tightened conditions in the mortgage market, which is likely to have at least some impact on housing demand, even if only at the margin.

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“However, the response from some corners claiming that these factors point to a sharp correction in house prices in the medium term are extreme in our view.”

NAB said that for a significant decline in house prices to occur there would probably need to be a substantial shock to the labour market or a sharp rise in interest rates – neither of which is forecast.

“Rather, the most likely outcome would be a prolonged period of very subdued capital growth,” it said.

“A period of subdued capital growth would also be consistent with our expectation of a period of subdued rental growth.”

[Related: Outlook rosy for residential construction]

Capital growth to be ‘very subdued’ in 2016
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James Mitchell

James Mitchell

James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.

He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.

He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.

James holds a BA (Hons) in English Literature and an MA in Journalism.

 

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