As clearance rates rose again over the weekend, a new report from UBS has forecast a slump in house price growth next year, but no crash.
The investment bank’s July housing report forecast annual house price growth to fall from 10 per cent now to 7 per cent by year end and then to plunge to between zero and 3 per cent in 2018.
“We ‘called the top’ [in April] and now have increased confidence a correction is unfolding, but still don’t see a crash,” said economists George Tharenou and Scott Haslem.
“Looking ahead, price growth has likely already peaked, and we still see moderation ahead, amid record supply/completions, poor affordability and rising mortgage rates. But, we still don’t see prices dropping given booming ‘people’ growth,” the UBS economists said.
The economists expect both building commencements and construction activity to have a “sharp downturn until at least the end of 2018, but said the lack of RBA rate hikes “reduces the chance this becomes a crash where commencements plunge to prior cycle lows closer to 130,000 (a year) which would then see a weaker labour market and falling prices”.
Their prediction follows the ANZ/Property Council of Australia survey of more than 1700 property professionals last week predicting residential and commercial real estate would growth halve in the next 12 months as the market cools due to tighter investor lending and more supply hitting the market.
Also last week, National Australia Bank cut its growth forecasts for both houses and units this year on the back of sharply deteriorating sentiment about the property market.
If a correction is coming, this weekend’s auction clearance results (on top of a surge in Sydney and Melbourne prices recorded by CoreLogic in June) provided little proof.
Both CoreLogic and Fairfax-owned Domain reporting higher clearance rates in Melbourne and Sydney with the national clearance rate rising to an average of 72.5 per cent from a final figure of 67.4 per cent last week, albeit from a fewer 1600-odd auctions.
In Melbourne, which had the most auctions – more than 750 – the preliminary clearance rate rose to 77.4 per cent from a final figure of 72.9 per cent last week, according to CoreLogic. Domain reported a 77.3 per cent preliminary clearance rate, up from 71 per cent last week.
“Although this result will revise lower as the final results are collected, it is likely to be stronger than what we have seen in Melbourne over the last month,” said CoreLogic.
In Sydney, where there were 600 auctions scheduled, CoreLogic recorded a 72.9 per preliminary clearance rate, up slightly from 68.6 per cent, while Domain’s clearance figure was 71.5 per cent, up from 66.2 per cent.
Among the smaller auction markets, clearance rates slumped in Brisbane to 44.8 per cent, from 55.7 per cent, with 116 auctions scheduled, but rose to 75 per cent in Adelaide, from 59.6 per cent, with 65 auctions scheduled, according to preliminary CoreLogic results.
In Canberra, where there were 39 auctions scheduled, the clearance rate rose to 72.7, up from 62.7 per cent, while Perth, which had 33 auctions scheduled, the preliminary clearance rate was 44.4 per cent, up from 36.4 per cent, according to CoreLogic.
Sales over the weekend suggested vendors are still taking big profits in sought-after locations. In Balgowlah Heights on Sydney’s Northern Beaches, a 1980-built five-bedroom house with a swimming pool on an 854-square-metre block sold for $3.55 million, a $670,000 gain on its most recent purchase price just over two years ago. The selling agents were Kingsley Looker and Michael Clarke of Clarke & Humel Property.