Australian home prices set to peak next year, Goldman says

(Bloomberg) – The Australian housing market will likely peak at the end of next year, then enter a period of stagnation in response to increased supply and tighter credit restrictions, according to Goldman Sachs Group Inc.

Prices will rise 22% this year, then slow down to a 5% gain in 2022, before stagnating in 2023 and then falling 2% the following year, Goldman economists led by Andrew Boak said on Tuesday in a statement. research note.

Goldman expects the Australian banking regulator to implement a combination of lending restrictions based on loan-to-valuation and debt-to-income ratios over the next year. Earlier this month, the regulator increased the minimum interest rate cushion that lenders must consider when assessing loan applications.

The Reserve Bank of Australia has kept its key interest rate at an all-time high of 0.1% since November 2020 and has indicated that it is unlikely to start increasing borrowing costs until at least 2024. Policymakers have made it clear that monetary policy is focused on trying to boost employment. and wages and will not respond to soaring house prices.

“From a policy perspective, we believe that slowing price growth over the next several years supports our relatively dovish view of RBA rates, as a short-term upward cycle would weigh on prices. and housing-related GDP growth, ”Boak said.

Contrary to the central bank’s outlook, traders anticipate rate hikes as early as late 2022 or early 2023.

Boak estimates that if the RBA followed market prices, housing would fall by around 13% between 2022 and 2024, subtracting about 1.5 percentage points from economic growth via a reduced wealth effect and reduced real estate activity.

© 2021 Bloomberg LP