Housing Market Slump In Australia Continues: What Investors Need To Know

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The dark clouds are still looming over the Australian housing market as the decline continues to impact the results of the companies. The property prices in Sydney witnessed a fall of 7.4% over the year, a level which has not been witnessed since 1990. The primary reason for the slump in the housing market is that the first home buyers have also started to experience the impact of weaker investor buying behaviour because of the lending restrictions. In the month of October 2018, the housing prices in Perth witnessed the fall of 0.8% while on an annual basis the prices have declined 3.3%. The market trackers are of the view that in comparison to the earlier downturns, while the speed is not much of a concern, the length of this negative momentum is a bit concerning. 

It seems like the housing market has spared Hobart as there the prices have been witnessing an uptrend. On an annual basis, the prices have witnessed a rise of 9.7%. The market participants are expecting that the fall in the housing price would continue because of the stricter lending facilities as well as elevated supply levels. They are expecting that these factors would continue to be the headwinds for the housing market. According to them, the fundamentals of the market has changed. While substantial opportunities prevail for the first home buyers, the macroeconomic headwinds with respect to the lending have been impacting the borrowing capacity of the first-home buyers. The clients including first-home buyers, medical professionals as well as high net worth professionals have been facing issues in their borrowings. Lower borrowing would mean that the buyers would be able to make lower purchases which the overall housing market.

However, some of the market players are expecting that the situation for the first home buyers might witness a favorable trend within the span of the next 12 months i.e. opportunities might be created. The increase in the prices in Hobart is primarily the result of increased demand as well as lower supplies. The strict lending conditions would also impact the banking stocks and hence, the broader stock markets. Therefore, we can say that, apart from the global hurdles which the Australian economy is facing, it is also witnessing the negative impacts from the local factors. The impact of the Royal Commission is expected to be felt on the performance of the major banks. Moreover, the decreased borrowings for the consumers would also impact the spending behaviour and, as a result, might restrict the overall economic growth.

On the other hand, the Reserve Bank of Australia might also go for holding the rates at the current levels in the November meeting while the Federal Reserve has adopted the policy of quantitative tightening. The RBA might be dovish moving forward. However, it is also expected that because of the downturn in the global markets, the Fed might not raise the rates at the rapid pace which could provide some relief to the US President Mr. Donald Trump.


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