The Australian housing market is set for a cooldown and prices will continue to rise without fear of a bubble, said a report released Monday.
One of the authors of the report Emily Dabbs, an economist at Moody's Analytics, spoke to Xinhua Monday, saying that the cooldown is already underway, particularly in the smaller market cities, but a pricing crash is not on the cards.
"The housing market will cool, probably in 2018 when the Reserve Bank we feel will start to raise interest rates. However, we are still expecting a slowdown in growth this year as well," Dabbs said.
"When people talk about the housing bubble, mostly they are talking about in Sydney and Melbourne where we have seen double digit price gains. If you look at Perth, it is quite a different story altogether."
Dabbs maintained that particularly in Sydney and Melbourne, the high demand for housing combined with steady job and population growth will see prices continue to grow, albeit at a slower rate than they are currently.
"We expect that while price growth will cool, especially in the investor space, we won't see a sharp correction because a lot of that is being driven by underlying demand, which is very strong," Dabbs said.
The report speculates that detached housing values in Sydney will increase 7.2 percent over this year, down from the 10.9 percent increase seen in 2016, while similar housing in Melbourne will see a 7 percent increase in 2017, also down from the 11.3 percent mark from last year.
Much is made of the impact of foreign investment into the housing market, especially in relation to pricing pressures. But Dabbs was adamant that the impact of overseas cash on the market is minimal when compared to the real drivers.
"It (foreign investment) is one driver of demand in Australia, but it is not the main driver. Record low interest rates are really boosting demand domestically for housing, and that is a more important driver of the recent price growth that we have seen," Dabbs said.
With the Australian government's yearly budget looming, the economist said much of the attention will be focused on what regulatory measures may be implemented in order to exert restraint measures in the current housing climate in Australia.
"We have already seen that the regulator is working with lenders to limit some of the more risky areas of growth: interest only lending, high loan to value ratios, and investor lending as well," Dabbs said.
"Those combined with interest rate rises to the banks, those factors combined together will also put a cap on the price growth we have seen over the past couple of years."
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