Australia house price growth likely to slow sharply owing to policy changes, macro-prudential regulation: ANZ Research

Australia’s housing price growth is expected to slow sharply due to a combination of policy changes and macro-prudential regulation. Similarly, residential construction activity has already started to lose momentum. While there is a solid pipeline of work in place, building approvals are down about 20 percent from their peak and likely have a little further to fall.

House price growth peaked in early 2017, with Sydney prices up 20 percent y/y in March, and Melbourne not far behind at 17 percent y/y. As a result, the twin issues of housing affordability and financial stability have been front of mind for governments, the RBA and APRA.

March 2017 saw APRA introduce another round of macro-prudential regulation, while both state and Commonwealth Governments have implemented a variety of policies aimed at slowing house price growth and improving housing affordability. The combination of further regulation and changes to government policy tighter borrowing conditions and out of cycle mortgage rate increases are all expected to weigh on the outlook for prices.

"We anticipate nationwide dwelling prices will rise by 4.4 percent y/y through 2017, before slowing further to 1.9 percent y/y in 2018," ANZ Research commented in its latest report.

Overall, Sydney and Melbourne price growth is expected to remain positive as population growth and demand remain elevated. Melbourne will be hindered by softer unit prices as new supply continues to come on stream, which is also expected to drive overall prices lower in Brisbane.