Housing Market Suffers Biggest Fall

22 January, 2019

Fitch: Australian Housing Market to Be Worst Performer Again In 2019

In a report released by ratings agency Fitch last week, Australia has been forecast to experience the biggest decline in house prices of the year. Fitch project house prices in the country to fall by around 5% this year, having already fallen 6.7% from their peak.

This decline would see Australia registering the worst performing housing market globally for a second consecutive year (rankings based on 24 countries measured by Fitch). The declines are seen as reflective of reduced investor demand for properties in the wake of increased regulatory restrictions on interest-only investment lending.

APRA Scraps Restrictions in Light of Housing Market Declines

In recognition of the impact that such increases in regulations have had on the housing market, the Australian Prudential Regulation Authority (APRA) removed the 30% restrictions on interest-only investment lending in December, which they declared had “served their purpose.”

Fitch: Housing Credit Growth to Fall Further

However, Fitch has affirmed its concerns over the upcoming Royal Banking Commission’s final recommendations due in February, which it feels could further reduce the availability of credit.

In the report, Fitch said that housing credit growth (referring to bank lending) would likely fall further to 3.5% this year, down from 5.1% registered in its last report in October. Loans in arrears by over 90 days have also been forecast to increase by 2020.

Fitch: Mortgage Delinquencies to Rise

Worryingly for the RBA, Fitch has also warned about the potential for a rise in mortgage delinquenciesdue to homes taking longer to sell. The household-debt-to-GDP ratio is currently at 121% in Australia which creates a major hurdle for the RBA in terms of normalizing monetary policy.

Any upward shift in rates would have severe knock-on effects for already overly indebted households. As such the RBA has consistently stated the need for wage growth to rise and household incomes to increase before it can begin to look at increasing rates.

However, the ratings agency does say in its report that it expects prices to stabilize by 2020 as a result of above-trend GDP, reduced spare capacity in the economy and high levels of net migration.

Property Analysts Cite Worst Housing Market Slump Since GFC

The report comes just a week after data released by property analysts CoreLogic, which showed that Australia has now suffered its largest housing market slump since the global financial crisis.

The data shows that the worst declines were in Sydney and Melbourne which are now down 8.9% and 7%, respectively, from their peaks. House prices were seen lower in half of Australia’s capital cities with Perth and Darwin also recording 4.7% and 1.5% declines, respectively.

Government Out of Ammo

Commenting on the state of the housing market, Tim Lawless, head of research for CoreLogic, told reporters the reason why the current slump is worse than anything seen since the GFC is due to the fact that the government is out of ammo when it comes to tackling the situation.

Lawless told ABC News: “We started to see interest rates coming down back in 2008, and a lot of stimulus came into the market in the form of the first home owner grant boost, cash handouts, infrastructure stimulus, and so forth… I don’t think we’re going to see a lifeline thrown to the market place this time in that form.”

RBA No Room to Manoeuvre

With the RBA currently keeping interest rates unchanged at all-time lows of 1.5% for a record 28 consecutive months, there is very little scope for further stimulus to help boost the housing market.

Lawless adds: “In addition, we’re heading towards a federal election where we could see some taxation policies being changed, which could have a further negative effect on the market.”

Lawless is referring to the promises made by the Labor party to scrap negative gearing tax relief for new investors looking to buy existing properties if it wins the election.

Source link  
USD Rebounds As Jobless Claims

The weekly jobless claims for the week ending April 5th touched a new low. Official data showed that the initial jobless claims fell to 196,000 beating...

USD Subdued As Inflation Rate Eases

The US dollar was seen trading weak on the day on Wednesday. Inflation data released by the Labor Department showed that headline inflation...

Dollar Steady Ahead Of FOMC Meeting

The US dollar, which was trading subdued the past few days held steady ahead of the FOMC meeting today. The Fed will be releasing its economic...

Market Sentiment Turns Cautious

A number of ongoing global narratives kept a lid on the markets with USD trading subdued ahead of major events this week. These include the two-day...

Gold Maintains Gains on Brexit Uncertainty

Economic reports from the UK showed that the GDP rose 0.2% in the three months to January. On a quarterly basis, the economy picked up the pace, rising 0.5%...

Surveys Give Hope On Eurozone Growth

The latest business surveys, measuring activity in the manufacturing and services sector for the eurozone painted a mixed picture. The overall...

US Payrolls Dent Dollar Gains

The U.S. dollar weakened on Friday amid the jobs report which dented the market sentiment which was already turning sour. Concerns of a global...

Halting Balance Sheet Reduction

The U.S. Federal Reserve released the meeting minutes from the monetary policy meeting from early January. The central bank's minutes showed...

Sweden's Riksbank Signals

The Swedish central bank held its monetary policy meeting last week where it left the key interest rates unchanged at -0.25 percent. The central bank...

In the past 24 hours Bitcoin has lost -1.24% and reached $5270.16305518. Open your trading account with the best cryptocurrency brokers on special terms today.

In the past 7 days the EUR/USD pair has lost -0.4259% and is now at $1.1296. Start trading and making money on Forex today.

In the past 7 days Ethereum has gained 1.81% and is now at $168.365046317. Have the most popular cryptocurrencies compared online 24/7.

Top Brokers offering Forex Market Analysis

Forex Currencies Forecasts

Top 10 Forex Brokers 2019

# Broker Review
5FIBO GroupFIBO Group85%