A return to growth cycle is likely to commence later this year, an economist predicts.
Speaking at the Capital Prudential investment event in Adelaide, AMP chief economist Dr Shane Oliver said while the rise in mortgage rates, high household debt, cost of living pressures, and poor homebuyer confidence will continue to impact the property market, expected the return of immigrants and other growth drivers are likely to spur recovery later this year.
“Ultimately, rising rents, low vacancy rates, return of immigrants and the Reserve Bank getting close to the top on interest rates I think will give us a recovery cycle in the property market, probably starting later this year and going into next year,” he said.
Dr Shane Oliver said some investors might be discouraged from the “negative coverage” on the state of the economy, but the likely recovery in the property market should entice them to participate.
“There’s a lot of noise out there. You turn on the news which is full of doom and gloom that can make everyone quite nervous and can result in people missing out on opportunities,” he said.
Based on his expectations, the national house prices would fall between 15% to 20% peak-to-trough.
According to CoreLogic’s home value index for February, dwelling prices have declined 8.9% since peaking in April last year. This is the largest and fastest decline in values since at least 1980 when CoreLogic’s records began.
Critical action urged to achieve housing needs
A statement from Master Builders Australia urged the Australian Senate to push for sensible reforms to be able to achieve the housing needs.
For context, the Economics Legislation Committee has commenced an inquiry into housing bills, including the Housing Australia Future Fund Bill 2023, National Housing Supply and Affordability Council Bill 2023, and Treasury Laws Amendments (Housing Measures No. 1) Bill 2023.
Master Builders Australia CEO Denita Wawn said the combination of the legislation provides the opportunity to embed housing as a core infrastructure priority for the Federal Government.
“Finding solutions to the issue of affordable housing is imperative as it poses one of the country’s biggest challenges, and we must work together to address it,” she said.
Based on Master Builders forecast, new housing over the next five years will fall short of the 200,000 homes needed annually until 2026-2027.
“We acknowledge the Housing Australia Future Fund Bill is a measured next step to further develop a national social and affordable housing fund whilst operating in a capacity-constrained market – however, to meet the additional 800,000 dwellings needed by 2035, the size of the Fund’s capital investment should be expanded from $10bn to $2bn,” Ms Wawn said.
“It’s critical that we address housing affordability and supply instead of prolonging action and allowing further deterioration in the market.”
