The Australian housing market is set to decelerate this new year as the booming Sydney and Melbourne markets hit the brakes.
According to the Housing Industry Association’s (HIA) Residential Outlook for 2016, the current growth cycle was “heavily masked” by Sydney and Melbourne.
“The fact is, outside of Sydney and Melbourne the term ‘housing price boom’ seems like a foreign language,” the Outlook says.
“…As of November 2015 Brisbane was still the third fastest growing state capital residential property price market in the country behind Sydney (+12.8% year-on-year) and Melbourne (+11.8% year-on-year), but at 4% per annum you would hardly call Brisbane a boom market.
“The aggregate price cycle, heavily masked by Sydney and Melbourne, will continue to experience decelerating growth.”
Further increases to variable mortgage rates coupled with the already tighter credit policies introduced in 2015 are expected to cool the Australian housing market over the next 12 months, according to the HIA.
“Sydney and Melbourne are our two biggest markets and it is appropriate that price growth is slowing. Variable mortgage rates are on the rise under the guise of covering increased funding costs and there may be more of that to come in early 2016. That will dampen price growth.
“…[O]utside of certain components of the Sydney and Melbourne markets there was little or no justification to tighten the credit screws, much less adversely affect some potential new housing projects. This action will further dampen price growth as well.”