CALLS of a housing bubble are nothing new, but there’s one thing no one can say for sure: when it will finally burst.
Now a leading investment bank has called the peak, in the latest of a long stream of predictions that Sydney and Melbourne’s seemingly endless price growth is about to reverse.
After a weekend of lower-than-usual auction clearance rates, UBS analysts put out a client note warning that it was now “ringing the bell” on the housing market.
“We are ‘calling the top’, but stick to our forecasts for commencements to ‘correct but not collapse’,” wrote economists Scott Haslem, George Tharenou and Jim Xu in the client note.
“While the historical trigger for a housing downturn (of RBA hikes) is missing, mortgage rates are rising, and sentiment of home buying collapsed to a record low,” they said, noting that construction activity remained “surprisingly buoyant”.
“Looking ahead price growth has likely now peaked, and we see a moderation ahead amid record supply and poor housing affordability,” they said, arguing that the rate of growth — four time faster than income — was unsustainable.
Prices would not drop, however, as the booming population would ensure a relatively soft landing.
“Housing activity will correct sharply and prices to cool, but still won’t ‘crash’,” the note said, adding that “the lack of RBA rate hikes reduces the likelihood this evolves into a crash.”
‘TOO SOON TO CALL’
Other analysts disagreed, including Louis Christopher of SQM Research, who said it was “really too early to call the end of Sydney and Melbourne’s housing boom”.
A weekend of lower-than-80-per-cent clearance rates was “hardly commensurate with some new downturn in the housing market”, Mr Christopher said.
“They are strong results,” he said, warning that people should not read too much into the situation.
“Could we hit the peak late this year? Yes, it is possible we could,” he said, conceding: “We are getting close to the top, far closer than we were a few years ago ... If we continually see, from here on out, clearance rates falling down and down, then yes that may indicate a downturn.”
Mr Christopher said that Reserve Bank efforts to clamp down on interest-only loans would not be enough to slow down the market.
CLEARANCE RATES DOWN
Australia’s average clearance rate slipped to 72.1 per cent at the weekend, from 73.9 per cent a week earlier when just 493 properties were up for auction due to the Easter break.
Melbourne - the nation’s second biggest city after Sydney - recorded the biggest increase in auctions over the week, with volumes surging to 823 from 102 the previous week. It also returned the highest clearance rate of all the capital cities at 76.8 per cent.
In Sydney, 75.8 per cent of the 585 properties up for auction sold, but of Brisbane’s 134 home auctions, only 45.8 per cent found a buyer.
The value of homes across Australia’s combined five capital cities fell 0.2 per cent last week, with Sydney and Brisbane both down 0.4 per cent.
But prices across the five capital cities have jumped 11.8 per cent over the past 12 months, driven by solid demand in Melbourne and Sydney.
Melbourne’s average home value has jumped 16.3 per cent over the 12 months to April 23, with Sydney close behind on 16.2 per cent.
— With AAP