A new report by the Reserve Bank of Australia (RBA) said that while housing prices picked up in the second half of last year, the sentiment could quickly turn, especially if prices start to fall.
The RBA said that prices were robust in the latter part of 2016, particularly in urban capitals Sydney and Melbourne. The uptick, the RBA said, “could see more spending and renovation activity than is currently envisaged.”
However, the bank also stressed that a “widespread downturn in the housing market” could be in the offing as “a more significant share of projects currently in the residential construction pipeline is not completed than is currently assumed.”
“While this is a low-probability downside risk, it could be triggered by a range of different factors. Low rental yields and slow growth in rents could refocus property investors’ attention on the possibility of oversupply in some regions,” RBA said in its outlook report.
Further, “Although investor activity is currently quite strong, at least in Sydney and Melbourne, history shows that sentiment can turn quickly, especially if prices start to fall.”
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