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BlackRock sees ‘prolonged’ slump in Australia's housing market
[SYDNEY] Australia's housing slump could go on for another 12 to 18 months as banks maintain tighter credit standards and prices slide amid an oversupply, according to the world's biggest asset manager.
National home prices could fall another 10 per cent and the decline will increasingly hit consumer confidence in 2019, said BlackRock Inc's Craig Vardy, head of fixed income for Australia. Values across the nation's capital cities dropped 5.3 per cent in the year through November, according to data from CoreLogic Inc.
"Moderation in the housing market is expected to continue. Residential construction indicates the housing cycle has well and truly peaked," Mr Vardy said at a briefing in Sydney on Tuesday. "It's going to be prolonged, so we could see over the next 12 to 18 months this will continue."
The state of Australia's housing market is one of three factors - alongside inflation and global trade - BlackRock has identified as key themes for Australia's economy that would play into central bank policy next year. The Reserve Bank of Australia has kept its benchmark at a record low amid concerns that declining housing prices will hurt spending among already heavily indebted consumers, which could derail an economy that has avoided a recession for 27 years.
Another issue for Australian property investors is a likely change in government from a federal election that has to be held by May. The opposition Labor Party, which is widely favoured to win, has signalled potentially removing some tax breaks that favour real estate investing.
Mr Vardy pointed to the surprise increase in home-loan approvals in October, saying it could be an indication buyers are bringing forward purchasing properties as prices come off and ahead of the potential change in government.