“A cooling of the housing market is expected to leave the RBA with room to consider cutting its cash rate further in coming quarters if needed,” Bloxham said in a note to clients. “Given the already strong gains in recent years in Sydney and Melbourne, the authorities have been seeking to cool the housing market in these cities.”
House prices in Sydney and Melbourne grew 13 per cent and 14 per cent respectively year-on-year in May, pulling the national market to an average year-on-year growth rate of 10 per cent. However, Bloxham expects house prices to grow at a rate between zero and five per cent this 2017, with national growth sliding to about four to five per cent.
New stamp duty and land tax surcharges on foreign buyers in NSW, Queensland, and Victoria are likely to stall otherwise strong foreign buying.
“Foreign purchases could partly explain the recent ramp-up in Sydney and Melbourne housing prices,” Bloxham said. “We expect recently increased taxes and changes to local bank lending practices are likely to weaken this source of demand in coming quarters.
Even though tighter lending standards since late 2014 have failed to drastically slow down property demand, the oversupply of apartments might do just that over the coming years.
“We expect that apparent oversupply in the apartment markets in Brisbane and Melbourne may see some unit price declines in these cities, but we expect the detached housing market to continue to see modest price gains,” Bloxham said.
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