As cracks start to show in the country's property market, HSBC economist Paul Bloxham reassures everyone that there is nothing to worry about. In his note titled, "Navigating the end of the housing boom," he said that the slowdown in house price growth and housing construction is likely to be offset by the growth of services and an easing in the mining slowdown.
"We see the end of the housing boom as manageable, as the next stage of the rebalancing act sees growth transitioning to being led by the services sector," he wrote.
There are already signs that the current level of housing work will pull back, but Bloxham believes that the economy will transform and focus on services exports like tourism and education. He also expects house price growth to slow down to between three and four per cent this year from last year's nine per cent.
Even though there are risks to the end of the housing boom, they are also tempered, such as the higher household debt that is being held by wealthier households with the capacity to repay it. While there is a risk of apartment oversupply in Melbourne, Brisbane, and Perth, all these cities do not have a looming oversupply of detached houses.
There is also the risk of an overseas crisis triggering a shock to household income levels all over Australia, but this can also be offset. The Reserve Bank's cash rate of two per cent still gives it scope to cut lending costs.
"We remain cautiously optimistic that the housing market will see a soft landing and that the lift in services exports will continue to create jobs," Bloxham said.
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