Australia Macro Service > Australia Research Briefings

Housing investment downturn has much further to run

Housing markets in the east coast capital cities have cooled significantly over the past year. Median house price in Sydney and Melbourne have declined by 18% and 15% from their peaks, respectively.

Building approvals and commencements have also weakened significantly in recent quarters, but the impact from a downturn in dwelling investment is yet to be fully realised. We forecast a detraction of 0.6%pts from GDP in 2019 and 0.5%pts in 2020.

Given the current stage of the housing market cycle, we do not expect lower interest rates to have a marked impact on residential construction. Property market yields are low, and households are already highly leveraged, and facing subdued income growth.

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