Several investment banks have warned a slowdown in Australia’s housing market could trigger a recession in 2016.
Macquarie Bank forecasts house prices declining gradually by up to 7.5%, starting March next year.
Credit Suisse says that housing is ‘no longer the safe haven asset’. It sees real estate as riskier than even the stock market…
As prices decline, they expect it to drag on the economy, raising the risk for a recession. JCP Investment Partners just ‘elevated’ their forecast for a likely recession in 2016 too.
For years, the growth in the housing market has driven the economy to record heights. It helped offset the downturn in mining. But now the housing market is close to peaking.
Supply, in key cities like Melbourne, is exceeding demand. Building approvals are on the up too. But they’re overshooting demand by 20–30,000 properties according to some estimates.
Following trends in recent months, house price growth is slowing as well.
Median prices in Sydney grew by just 1.1% in August. That was in contrast to growth of over 5% between June and July. Then, in September, Sydney saw no price growth at all. And that’s from a city which grew by almost 17% in the past year!
The same is true across the rest of Australia. In cities like Perth, house prices are down by almost 1% over the past year. In Adelaide, prices have fallen half a percent during the same period. So you have prices slowing and supply rising, both of which suggest the market has peaked.
Already house prices are slowing. Slowing population growth, alongside investor lending clampdowns is already having an effect.