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Australia's Housing Boom Over as Prices Flatline, UBS Says

The housing boom that has seen Australian home prices more than double since the turn of the century is “officially over”.

Australia's Housing Boom Over as Prices Flatline, UBS Says
The Sydney Opera House, center left, and buildings are seen between residential blocks as they stand illuminated at dusk in Sydney. (Photographer: Cole Bennetts/Bloomberg)

(Bloomberg) -- The housing boom that has seen Australian home prices more than double since the turn of the century is “officially over,” after data showed prices now flatlining, UBS Group AG said.

National house prices were unchanged in October from September, while annual growth has slowed to 7 percent from more than 10 percent as recently as July, CoreLogic data released Wednesday showed.

“There is now a persistent and sharp slowdown unfolding,” UBS economists led by George Tharenou said in a report. “This suggests a tightening of financial conditions is unfolding, which we expect to weigh on consumption growth via a fading household-wealth effect.”

An end to Australia’s property boom will be welcome news for first-time buyers, who have struggled to break into the market after surging prices propelled Sydney past London and New York to be the second-most expensive housing market. Less impressed may be property investors, already squeezed by regulatory lending curbs that drove up mortgage rates.

Australia's Housing Boom Over as Prices Flatline, UBS Says

The cooling housing market may encourage the Reserve Bank to keep interest rates at a record low. A rate hike would be undesirable as it would put further downward pressure on dwelling prices, said Diana Mousina, senior economist at AMP Capital Investors.

To contact the reporters on this story: Peter Vercoe in Sydney at pvercoe@bloomberg.net, Matthew Burgess in Sydney at mburgess46@bloomberg.net.

To contact the editors responsible for this story: Sree Vidya Bhaktavatsalam at sbhaktavatsa@bloomberg.net, Paul Panckhurst

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