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Australia housing market revival to continue into 2020: poll

Analysts expect further interest rate cuts to the record-low 0.75% benchmark cash rate to stimulate market activity, prices

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House prices in Sydney are forecast to rise 7.7%, but analysts are sceptical about how long the revival would last.

Bengaluru, India

AUSTRALIA'S housing market revival will carry on into 2020 thanks to a series of interest rate cuts from the Reserve Bank of Australia (RBA) this year and another expected next year, according to a Reuters poll of property market analysts.

Respondents were, however, sceptical about how long the rebound would last, with most saying it would only be a year before the rate of house price inflation cooled off again.

The latest Reuters poll of 13 property analysts taken on Nov 6-20 showed that average home prices would rise 5 per cent nationally next year, nearly double the rate predicted just three months ago, and then slowing to 4.5 per cent in 2021.

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Six of 10 analysts who answered an additional question said that further interest rate cuts to the record-low 0.75 per cent benchmark cash rate after three RBA cuts already this year would stimulate Australia's housing market activity and prices significantly.

"How the story has changed. Six months ago, the key debate among many Australian housing market observers was how much further prices could fall," noted Paul Bloxham, chief economist at HSBC in Sydney. "We expect housing prices to continue to rise in 2020, underpinned by mortgage rates, which are likely to stay low for a considerable period of time."

The RBA is expected to ease once more in 2020 in its bid to boost a slowing economy that has marked nearly three decades of uninterrupted expansion.

All but one respondent in the latest poll said that Australia's housing market activity is more likely to rebound over the coming 12 months than decline again.

"Households have responded strongly to regulatory easing and rate cuts. Strong pricing growth, particularly in Sydney and Melbourne, is likely over the next year," noted ANZ economist Adelaide Timbrell.

A regional breakdown of the poll data showed that Sydney and Melbourne - Australia's two most populous cities which contribute about 43 per cent to the country's gross domestic product - would lead property price growth in 2020.

House prices in Sydney and Melbourne were forecast to rise 7.7 per cent and 7.4 per cent in 2020, respectively. In Brisbane and Adelaide, they were expected to rise 2-3 per cent next year and in 2021.

But analysts were sceptical about how long the sudden revival in Australia's property market would last, particularly given that the broader economy is still not showing many signs of improvement.

Australia's wage price index rose 0.5 per cent in the third quarter and consumer sentiment held below average in November, suggesting that recent monetary policy stimulus has failed to spur household demand.

In another poll taken last month, economists forecast the Australia economic growth to slow to 1.9 per cent this year, the weakest rate since the 1990-1991 recession, followed by 2.5 per cent in 2020 and 2021.

"A strong rebound in household consumption will remain elusive, given that the outlook is for income growth to remain subdued in the coming quarters," noted Katrina Ell, an economist at Moody's Analytics. REUTERS