OECD warns of 'dramatic' end to Aussie housing boom

by Julia Corderoy03 Jun 2016
The Organisation for Economic Co-operation and Development (OECD) has warned of a “dramatic and destabilising” end to the housing boom in Australia.

Despite receding risks from the housing boom, the OECD said in its latest economic outlook that “close vigilance” on housing-market developments is still required – as it could lead to a messy end.   

“Domestically, the unwinding of housing-market tensions to date may presage dramatic and destabilising developments, rather than herald a soft landing,” the think tank said.

Martin North, principal of Digital Finance Analytics said he believes the risks revolve around the high density apartment market.

"We think the risks are centred on the high-rise apartment sectors, especially in the east coast urban centres. In our worst case scenario, prices may fall up to 38%, in Melbourne but not immediately," he wrote this morning.

However, the latest figures from CoreLogic RP data suggests national house prices have rebounded. Across May, capital city house prices jumped 1.6%. Since the beginning of January, house prices have recorded a 5% increase, causing the annual trend in capital gains to rebound after conditions tapered since July last year. 

The annual rate of growth, which recorded a recent trough in December last year at 7.4%, has since recovered back to 10% at the end of May.

In terms of broader economic growth for Australia this year, the OECD also forecast GDP growth of 2.6% this year, which will gradually strengthen towards 3% in 2017. 

“Growth in the non-resource sector will pick up, aided by dollar depreciation and a steady increase in household consumption. Further falls in the rate of unemployment are not expected to generate strong inflationary pressures and will help reduce inequality,” it said in its economic outlook.
 

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