- Australian home prices are likely to fall another 5-10% this year driven by a further 15% or so fall in Sydney & Melbourne. Tight credit, rising supply and falling price expectations are the main negatives.
- Uncertainty around the impact of possible tax changes is likely also impacting investor demand.
- The housing downturn will be a significant constraint on Australian growth. We expect the RBA to cut the official cash rate to 1% this year.
The housing cycle and house prices always incite high interest in Australia. Until recently it was all about surging prices and poor affordability – particularly in Sydney and Melbourne. Over the last year it’s turned into how far prices will fall and what’s the impact on the economy. Global issues and the election aside, the housing downturn is likely to be the main issue for Australia in 2019.
This note by Dr Shane Oliver, Head of Investment Strategy and Chief Economist, AMP Capital, provides a Q&A on the main issues. Read the full Q&A here.
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