UBS (UBS) economists expect house prices to fall more than 5 percent next year, with credit tightening being the main reason.
More than a year has passed since investment bank UBS said Australia`s housing boom peaked last year. Home prices in Sydney fell 5.2%, while prices nationwide fell 0.3%, according to Corelogic.
UBS economist George Zareno (George Tharenou) said in a report on Friday that we have shifted the basics to our "credit crunch programme", in which home loans are down about 20%, credit growth is falling (slowing) and house prices continue to fall. The Bank of Australia held back on interest rates.
"coupled with record housing supplies over the next few years and a decline in foreign buyers, we expect house prices in Australia to fall more than 5 percent in the coming year."
The Royal Banking Commission`s investigation will lead banks to tighten credit lending, which many expect will hurt home prices.
UBS economists said the weakness in the housing market was "faster than the spread of our pessimism," and that housing loans had fallen about 10 percent since August before the impact of the Royal Commission`s comprehensive survey.
The third phase of "macro-prudential austerity" is a "game changer," which will further substantially tighten credit in the future, predict higher cost-of-living spending, and reduce debt-to-income ratios by about 30 percent to 40 percent. "
More broadly, falling house prices could lead to a retreat in the "household wealth effect".
This week, Paul, (HSBC) economist at HSBC? Brockham (Paul Bloxham) also cut home price forecasts for Sydney and Melbourne.
Prudent conditions have tightened, housing supplies have increased and foreign demand has fallen, with the Australian branch of the global investment bank predicting a 3-5 percent drop in Sydney prices this year and a 2-4 percent drop in December.
