HSBC Forecasts Further Drop in Australia House Prices
(Bloomberg) -- HSBC Holdings Plc Australian chief economist Paul Bloxham has joined the ranks of local property bears.
Nationwide, prices will fall between 3 percent to 8 percent in 2019, having declined 2 percent this year, he said.
The call is a change of tune for Bloxham, who last year said soaring home prices were being driven by strong demand and a lack of supply, rather than indicating a bubble. In May, he forecast Sydney prices would dip between 3 percent to 5 percent in 2018, while Melbourne prices would rise as much as 3 percent.
“A cooling was expected, but the price falls have been larger than previously forecast,” Bloxham wrote Tuesday. “The cooling has been due to a reversal of factors that drove the boom in the first place.”
These include a supply shortage, which has been worked down by a building boom; falling interest rates, which have since stabilized; strong foreign demand, which has weakened due to constraints on foreign buyers; strong growth in lending to investors, which has been constrained by tighter prudential settings; and expectations of capital gains, which drove investor activity, but have eased.
UBS Group AG analyst Jonathan Mott last week warned Australian house prices could plunge 30 percent under a deep-recession scenario in which the nation’s 27-year economic expansion ends, unemployment climbs and the central bank cuts interest rates to zero.
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