13-10-2015, 07:16 AM
House prices tipped to fall as market cools off
Kylar Loussikian
[Image: kylar_loussikian.png]
Journalist
Sydney
[Image: 679985-4f067344-70a5-11e5-9eda-7a08ca7db548.jpg]
Source: TheAustralian
[b]Three investment banking heavyweights have warned of uncertain times ahead for the housing sector, with Macquarie analysts forecasting a fall in dwelling prices from the start of next year before they start recovering in mid-2017.[/b]
Downward pressure on credit growth and the resulting lower auction clearance rates and house prices would present “multiple threats” to consumer spending, Macquarie said.
Its warning comes as Credit Suisse wrote to clients that the deterioration in home-buying conditions had been “particularly sharp in NSW”.
Credit Suisse analysts declared the residential housing sector was becoming riskier than equities and would be a worse performer than bonds as the supply of new homes increased but buyer sentiment soured.
“Macroprudential tightening, out-of-cycle rate hikes on investor mortgages and weakness in Chinese buying are having a clear impact on sentiment and demand,” they said. “It is interesting to note that the correlation between sentiment and home sales is particularly strong in NSW but much looser in other states.
“The strength of the correlation, and the extreme negativity of NSW home-buying sentiment, is a worrisome development.”
It was the first time since the mid-2000s that housing risk had eclipsed equity risk, Credit Suisse analysts wrote.
Some banks have backed away on lending for property investment and development.
Westpac will be the least affected by a housing market downturn, according to Macquarie, followed by NAB and the Commonwealth Bank.
Mark Whelan, ANZ’s head of Australia, said the bank had lowered lending to developers in areas with strong supply to avoid risks from a cooling property market. That followed August reports that the Commonwealth Bank had tightened lending standards to developers.
Housing starts, at 200,000 for the 12 months to the end of March, are expected to fall to 161,000 for the calendar year and to 150,000 in the year to June 2017.
Goldman Sachs analysts wrote: “Looking through the usual month-to-month volatility, and given our broader views on the housing market, we would be surprised if this momentum did not fade in the coming months.”
Credit Suisse said the outlook would put pressure on building materials firms, downgrading CSR and Brickworks to underperform. Both Credit Suisse and Macquarie forecast rate cuts, as early as next month.
“From a policy perspective, the RBA and the Australian Prudential Regulatory Authority welcome a cooling in the housing market, and a greater private sector appreciation of the risks from excessive housing leverage,” Credit Suisse wrote.
“But the RBA would not like to see a sharp fall in NSW housing demand, as the sentiment indicators are suggesting, as this would severely inhibit growth rebalancing efforts, and indeed, create systemic risks.”
- THE AUSTRALIAN
- OCTOBER 13, 2015 12:00AM
Kylar Loussikian
[Image: kylar_loussikian.png]
Journalist
Sydney
[Image: 679985-4f067344-70a5-11e5-9eda-7a08ca7db548.jpg]
Source: TheAustralian
[b]Three investment banking heavyweights have warned of uncertain times ahead for the housing sector, with Macquarie analysts forecasting a fall in dwelling prices from the start of next year before they start recovering in mid-2017.[/b]
Downward pressure on credit growth and the resulting lower auction clearance rates and house prices would present “multiple threats” to consumer spending, Macquarie said.
Its warning comes as Credit Suisse wrote to clients that the deterioration in home-buying conditions had been “particularly sharp in NSW”.
Credit Suisse analysts declared the residential housing sector was becoming riskier than equities and would be a worse performer than bonds as the supply of new homes increased but buyer sentiment soured.
“Macroprudential tightening, out-of-cycle rate hikes on investor mortgages and weakness in Chinese buying are having a clear impact on sentiment and demand,” they said. “It is interesting to note that the correlation between sentiment and home sales is particularly strong in NSW but much looser in other states.
“The strength of the correlation, and the extreme negativity of NSW home-buying sentiment, is a worrisome development.”
It was the first time since the mid-2000s that housing risk had eclipsed equity risk, Credit Suisse analysts wrote.
Some banks have backed away on lending for property investment and development.
Westpac will be the least affected by a housing market downturn, according to Macquarie, followed by NAB and the Commonwealth Bank.
Mark Whelan, ANZ’s head of Australia, said the bank had lowered lending to developers in areas with strong supply to avoid risks from a cooling property market. That followed August reports that the Commonwealth Bank had tightened lending standards to developers.
Housing starts, at 200,000 for the 12 months to the end of March, are expected to fall to 161,000 for the calendar year and to 150,000 in the year to June 2017.
Goldman Sachs analysts wrote: “Looking through the usual month-to-month volatility, and given our broader views on the housing market, we would be surprised if this momentum did not fade in the coming months.”
Credit Suisse said the outlook would put pressure on building materials firms, downgrading CSR and Brickworks to underperform. Both Credit Suisse and Macquarie forecast rate cuts, as early as next month.
“From a policy perspective, the RBA and the Australian Prudential Regulatory Authority welcome a cooling in the housing market, and a greater private sector appreciation of the risks from excessive housing leverage,” Credit Suisse wrote.
“But the RBA would not like to see a sharp fall in NSW housing demand, as the sentiment indicators are suggesting, as this would severely inhibit growth rebalancing efforts, and indeed, create systemic risks.”