Modest growth in housing market likely in 2016

While residential property prices might fall in 2016, it will be limited to less than 10% with “little significant downside risk” to the housing market, ANZ has said in its latest housing update.

According to a recent Australian Financial Review article, despite the headwinds facing the housing market though the second half of 2015, ANZ predicted little significant downside risk to the housing market outlook in 2016.

“That is not to say house prices won’t fall. They may. But strong underlying demand for housing is likely to contain any price falls in the major capital cities to less than 10% in the absence of an economic downturn,” ANZ’s senior economist, David Cannington and economist Daniel Gradwell said.

Auction clearance rates across the country continue to slide with Sydney taking the lead. Sydney clearance rates have fallen to below 60% from a high of 90% in April.

ANZ said the overall Australian market is not overvalued because salary and wages were still growing and interest rates were at record lows.

But the strongest housing market, Sydney might be at a point of “overvaluation”.

“This means there will be little respite for those seeking to enter the market for the first time as deposit affordability will remain difficult,” ANZ said.

While ANZ remained optimistic of continued growth in the housing market, any growth would be soft.

ANZ is forecasting a modest 3% rise for NSW while SQM Research predicts a 4 –9% price growth in Sydney.

After a hectic 24 months, housing construction will also post little-to-no growth, ANZ said.