House Prices Tipped To Rise Soon

Posted on 8/06/2019  
House Prices Tipped To Rise Soon

The housing market downturn in the biggest cities is coming to an end, according to economists predicting a spike in house prices as soon as July.

It comes after Commonwealth Bank's home loan applications jumped to a 10-month high and the RBA cut the official interest rate.

Macquarie Bank’s equities strategy team says data has previously demonstrated a huge bounce-back after a peak decline in property prices, with history expected to repeat itself come July.

“House price growth reached its worst on an annualised basis in January. Prices have continued to fall since then, but the rate of decline has slowed,” the bank wrote in a statement.

“If you look at prior cycles, an increase in house prices occurred five to seven months after the trough in the annualised growth rate. Using the average of six months, prices could rise by July.”

The bank said in every Australian house price cycle since 1989, price growth followed within seven months after the monthly annualised price decline bottomed.

Macquarie’s prediction extends further than past performance, with the bank also attributing looming interest rate cuts, relaxed lending conditions and the recent election result to its positive outlook.

“With the surprise Coalition election win, APRA’s policy change and an expected June RBA rate cut, we are more confident Australian house prices could rise within months,” the note read.

“This should flow through to better growth in housing finance and building approvals.”

AMP Capital chief economist Shane Oliver shares similar sentiments.

“The combination of the removal of the threat to property tax concessions, earlier interest rate cuts, financial help for first home buyers and APRA relaxing its 7 per cent interest rate test points to house prices bottoming earlier and higher than we have been expecting,” he said in a note.

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