Blue Chip Mortgages Port Macquarie Finance

18-01-2017 OUTLOOK FOR HOUSE PRICES IN 2017

Jonathan Chancellor | 18 January 2017| PROPERTY OBSERVER

Melbourne property prices could rise during 2017: Saul Eslake

Melbourne property prices could rise during 2017: Saul Eslake

Economist Saul Eslake does not think the RBA will raise rates simply to dampen property price inflation if for some reason prices run along at a much higher-than-expected rate during 2017.

When it comes to the outlook for house prices in Australia in 2017, Eslake says its is unwise to talk about the Australian housing market as a single, homogeneous entity.

"There is a considerable divergence between supply and demand conditions across Australia, and among Australia's major cities," he noted.

In Perth and Darwin, in the aftermath of the mining investment boom and with population growth slowing sharply, property prices have begun to decline and Eslake says "will likely fall further this year.

By contrast, population growth in Victoria is accelerating (reaching a seven-year high in mid-2016) so Eslake says "even though there is a lot of new supply coming on-stream in Melbourne, prices could still keep rising during 2017, albeit at more moderate rates.

"There might conceivably be more risk in Sydney – where new housing supply is picking up more rapidly than in Melbourne while population growth has begun to slow – although at least partly offsetting those risks is that the new supply is less geographically concentrated in Sydney than it is in Melbourne (or Brisbane).

In the absence of any obvious trigger for prices to start falling, Eslake says he thinks that Sydney will see further property price increases in 2017.

"But at a more sedate pace than in 2015 or 2016.

"I should add, I don't think this is a good thing – I don't believe that Australia's long-term economic and social interest is well-served by ever-rising property prices, or by an entrenched belief that property prices only ever go one way.

"I don't think it's a good thing that lending to property investors has started to rise again, after slowing during 2015-16 in response to the tightening in lending standards dictated by APRA."