FNArena’s Weekly Insights – September 12 2022
In this week’s Weekly Insights:
-Inflation & House Prices
-Conviction Calls
-Research To Download
By Rudi Filapek-Vandyck, Editor
Inflation & House Prices
One of the more eye-catching forecasts made recently is that persistent inflation in Australia will prevent local house prices from experiencing a true crash a la Spain, Ireland or the US post-GFC.
After all, building a new property is still becoming more expensive, just ask any builder, and ultimately existing homes cannot be cheaper than building a new one – if it happens, it won’t last. Not in a country like Australia.
The forecast was made by UBS where economists and analysts have collaborated on a deep-dive analysis of Australian housing markets.
While Australia might be poised to avoid worst-case scenarios, UBS’s prediction is house prices will still drop by a record -13% peak-to-trough with serious follow-on impact on related activities.
Overall sales of houses are projected to fall by -25%. Home loan values are expected to drop by -40% and housing credit growth is anticipated to slow to 4% year-on-year by late 2023; the latter would also be a record low for Australia.
The good news, UBS suggests, is that, adjusted for inflation, the fall in house prices amounts to -20%.
And while the cost of building a new house has already risen by some 20% since this time last year, the odds remain in favour of further cost increases, not only because of international dynamics, but also because of extremely tight labour markets locally and the government soon allowing for increased immigration numbers entering the country.
Vacancy rates already are tight and rents on the rise.
