The Australian housing prices boom has reached its peak, investment bank UBS said.
“After housing activity rose consecutively for over four years, its longest ever boom, we are now calling the top and think that housing activity has already peaked,” UBS economists Scott Haslem, George Tharenou and Jim Xu wrote in a note.
“Mortgage rates are rising, and sentiment of home buying collapsed to a [near] record low… Hence, we are ‘calling the top’, but stick to our forecasts for [dwelling construction] commencements to ‘correct but not collapse’ to 200,000 in 2017 and 180,000 in 2018.”
National house price growth is currently at 13 per cent, the highest in seven years, but UBS expected the growth to fall to 7 per cent this year, and 0-3 per cent next year. “We see a moderation ahead amid record supply and poor affordability, with the new buyer mortgage repayment share of income spiking to a decade high,” UBS said.
While house prices will still be out of reach from first home buyers, the bank said more rental options will be available following completion of units this year, allowing rents to rise more slowly than incomes.
The bank also warned that while the risks for housing slump are low, considering strong population growth and stable employment, the country’s record household debt and high housing prices could still cause trouble.