Australia’s housing boom is starting to pull back, making way for more sustainable growth in the property market.
Disappointing home loan and house price data from the Australian Bureau of Statistics on Tuesday showed the housing market was still looking good but had pulled back from the boom seen late last year, JP Morgan economist Tom Kennedy said.
The number of home loans approved in March fell 0.9 per cent, weaker than economists’ expectations of a 0.5 per cent rise.
Australian capital city house prices continued to rise in the March quarter, by 1.7 per cent, softer than the 2.9 per cent rise economists were expecting.
“We saw very, very solid growth in Sydney and Melbourne, and most other major property markets, and what we’re seeing now is a pull back,” Mr Kennedy said.
“Over the past few months, there’s been quite a slowdown and deceleration from the euphoria that we saw in the second half of last year.”
But that growth had been unsustainable, Mr Kennedy said, and “prices are now growing at levels that are perhaps more sustainable over the long term”.
Other data such as auction clearance rates and building approvals were also pointing to a wind down in the housing market, he said.
Westpac senior economist Matthew Hassan said the housing market was moderating and would continue to do so this year after a very strong finish to 2013.
Rising prices had dampened consumer sentiment around buying a property, he said.
“It’s just becoming more difficult for owner occupiers to get into the market,” Mr Hassan said.
“What we’re seeing from our consumer sentiment survey is a pretty clear turning point in assessments around time to buy a dwelling that indicate price gains are starting to impact buyer perceptions and point to a slowing in price growth by the middle of the year.”
UBS economists said housing would remain solid, despite “cooling” off.
“This cooling followed a period of ‘heat’, such that housing activity will likely remain solid and still add to overall growth this year, supported by ongoing record low interest rates,” they said.