Housing market could “go negative” if rates rise

Adam Smith 7 July 2016

house jengaThe Australian property market could “go negative” in 2017, an economist has predicted.

AMP Capital chief economist Shane Oliver has said the housing market could see declines of up to 10% for houses and up to 20% for units if interest rates rise in 2017 or if the country heads into recession, News Ltd has reported.

“My view is we are heading towards a cyclical downturn in property prices, and the apartment market will be far more vulnerable,” Oliver said.

Oliver said buyers should be “extremely wary” of apartments, and shouldn’t be “rushing into” the Sydney or Melbourne markets.

CoreLogic has previously flagged apartment oversupply, saying an overhang of stock could put settlements at risk. In response to rising supply, Macquarie Bank recently told mortgage brokers it would wind back loan to value rations in a number of high density postcodes it deemed risky.

NAB chief economist Alan Oster told News Ltd the supply of apartment stock will swell significantly in the next two years.

“The overbuild is not unmanageable in the next 12 months, it’s the year after that it really gets interesting. If you look at July 2017 to June 2018, that’s when there is a huge amount hitting the market,” Oster said.

But Oster argued that foreign investors could put a floor under prices.

“We haven’t seen any sign they’re defaulting and we’re not sure they will. The issue is, what happens if they all decide to sell at once? That will be a problem. But that’s the thing we can’t think of — there’s no bloody obvious reason why they would,” Oster told News Ltd.

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