Careful Adjustment with the Chance of Crash (Unlikely)

Considering the Government’s recent Macro-Prudential regulation for the housing market and the potential of more to come we are now looking at the peek of the property market according to UBS and as indicated in the latest figures of ‘Consumer sentiment towards housing’.

If UBS are correct and the property market has, in fact, peaked then housing may become more affordable if household income can catch-up. Unfortunately, it is highly unlikely for this to be the cause in the foreseeable future as there is no real jobs growth.

In addition, UBS predicts property prices may stagnate but will not fall. Hence, unless there are other economic adjustments as, for example, rising interest rates property prices will remain high and housing unaffordable without a significant rise in household income.

Making further legislative changes such as to capital gains tax and negative gearing would hardly make a dent to housing affordability and simply drive rents up.

As it is highly unlikely the RBA will increase interest rates and trigger the long-feared debt bubble burst, property prices will (likely) remain high with potential growth …. be it at lower rates.