We all know this property cycle will come to an end – as they always do.
But when will it occur and how big will the correction be?
This now seems to be the question many property economists are asking and attempting to answer.
Of course I could say that the only reason we have economic forecasters is to make astronomers forecasts look good – but that would be unfair.
It’s important to be prepared for the future, but it’s also important to know that many forecasts (despite all the detailed work behind them) are wrong.
Anyway….here’s another forecast:
According to investment bank UBS, Australian property prices are potentially heading towards a correction in the next two or three years,
Its bubble analysis of soaring property prices concluded there was no sign yet of any impending cause for the burst, hence its vague 2016-2017 timeline.
UBS senior economist George Tharenou explained:
“Overall, housing is showing some bubble-like features, but it lacks a trigger to pop it near-term
“A rate hike by the RBA will be the key to any price correction, noting previously home prices growth periods were hit by interest rate increases in 2003, 2007 and 2010.
“Those downturns were only triggered when the RBA hiked,”
“Historically the key catalyst for housing approvals to peak is RBA rate hikes; not excess supply or unemployment.”
More price growth and a soft landing:
UBS predicts national investment in housing will grow by 10% into 2016, prompted by record low home borrowing interest rates.
“My forecast is for 6% (house price growth this year) and I have a soft landing in my forecast, but I’ve been thinking this for a while and the market has only continued to accelerate.”
George Tharenou said he hoped that prices will moderate “so we get a soft landing.”
“The risk case, of course, is that that won’t happen,”
So when will interest rates rise?
Most economists at Australia’s leading banks and financial institutions do not anticipate a rate increase until the end of 2016 or beyond.
In fact many are factoring in an interest rate cut later this year and the majority believe a rate cut of 0.25% will occur before April 2105.
I’ve given a more detailed view of my thoughts on what’s ahead here: Housing market to ease in 2017
Subscribe & don’t miss a single episode of michael yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to michael yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.