Home News House price inflation should slow in 2015, says economist

House price inflation should slow in 2015, says economist

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House price inflation is set to decelerate further in 2015, predicts Saul Eslake, an economist from the Bank of America Merrill Lynch.

Eslake was quoted in The Sydney Morning Herald as arguing that real wage and income weakness will continue to hold back economic growth, specifically weighing on construction activity and household sentiment.

His predictions come amid record-low lending rates across the country and the publication of official data confirming real wage declines.

He added that plans by the Australian Prudential Regulatory Authority to impose stricter conditions for approving investor loans will also be a factor.

"It is our view that national median dwelling-price growth will decelerate markedly in 2015," he wrote.

"This is as household income growth and sentiment remains soft, the unemployment rate rises, affordability deteriorates and the stimulatory impact of low interest rates fades."

Moreover, Eslake said that 68% of Australian landlords eventually declare an income loss on their properties and are relying on capital gains to offset income losses.

"The latest data from the Australian Tax Office for 2011-12 suggests that 19%, or around one in five, Australian taxpayers is a landlord," said Eslake.

"And of this, around 13 per cent of these taxpayers are taking advantage of negative gearing," he said.

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