Housing collapse: We may be only half way through feared 20 per cent price plunge
Australia was likely to be only half way through the fall in house prices with an ultimate drop of between 15 per cent and 20 per cent, according to AMP Capital economist Shane Oliver.
What are we chossing to give up for population growth? (file image)
He said the current bounce in house prices, led by a recovery in Sydney, would be short-lived and the demand from bargain hunters would run its course.
CoreLogic data showed house prices have risen 0.3 per cent in the first two weeks of March across Sydney, Melbourne, Brisbane, Perth and Adelaide, but the company said there was no certainty those increases would be maintained.
Another property monitoring company, PropTrack, recently revealed that Brisbane had experienced its second consecutive month of small median price gains.
Higher interest rates were still the dominant force in the market even with some predicting the Reserve Bank could pause its interest rate hikes next month as the world deals with the fallout from banking failures.
However, Ray White chief economist Nerida Conisbee said the ASX 30 Day Interbank Cash Rate Futures Index was indicating a 46 per cent expectation of an interest rate cut to 3.35 per cent next month.
“Even if rates remain stable in April, market expectations are for the next interest rate movement to be downwards,” Conisbee said.
She said any rate cut would mean the recent growth in house prices would continue.
Oliver said the current environment was very hard to read and there was a possibility that prices had bottomed, particularly if interest rates had peaked and if the Australian economy had a soft landing.
“But even if this is the case, in the absence of much lower interest rates the recovery is likely to be constrained as buyer capacity to pay for homes will be constrained,” Oliver said.
He said property down cycles in 2009, 2012 and 2019 only saw prices sustainably bottom once interest rates started falling.
“The hit to home-buying capacity from rate hikes – of around 27 per cent for a buyer with a 20 per cent deposit and average full-time earnings – remains even if rates have stopped rising,” he said.
And it often took two to three months for an increase in interest rates to impact mortgage payments.
However, the positive for the market was there was improved demographic demand, constrained supply and tight rental markets.
