A leading economist has explained how a slowdown in the Sydney and Melbourne property markets will shape the decisions of APRA and the RBA.
In Australia, home prices softened further in December as the Sydney and Melbourne property boom continues to deflate.
“Tighter lending standards, rising levels of unit supply, slower Chinese demand and reduced investor enthusiasm for property are all impacting and are likely to lead to further declines in Sydney and Melbourne property prices this year of around 5 per cent — maybe a bit more in Sydney and a bit less in Melbourne,” AMP Capital chief economist Shane Oliver said.
“The cooling in the Sydney and Melbourne markets is good news for APRA and the RBA and helps provide the necessary flexibility to leave interest rates low until the broad economy is ready for a hike (which we don’t expect to be the case until late this year).
“It also provides a bit more room for first home buyers. However, other cities are running to their own cycles, with Hobart likely to continue strengthening, Perth and Darwin close to the bottom and moderate growth in Adelaide, Brisbane and Canberra.”
Following the release of the latest CoreLogic Hedonic Home Value Index, which revealed that national home values dropped by 0.3 per cent in December, CoreLogic head of research Tim Lawless predicted that the slowdown trend will continue throughout 2018.
“In 2018, the housing market performance is likely to be significantly different relative to previous years,” the head researcher said.
“We’re likely to see lower to negative growth rates across previously strong markets, more cautious buyers and ongoing regulator vigilance of credit standards and investor activity.”
[Related: Industry predicts what will happen in 2018]