The International Monetary Fund (IMF) predicts that the Australian property market is set to cool as Sydney’s house prices deflate.
Following an official visit to the country, the IMF reported that the Australian property market is expected to slow down, although the findings indicate the market is more likely to stabilise as opposed to crash.
The results imply there won’t be any major surprises in the Australian economy in the foreseeable future.
“The housing market is expected to cool, but imbalances – lower housing affordability and household debt vulnerabilities – are unlikely to be corrected soon,” stated the official report.
“In the absence of a major shock to the economy, the cooling is expected to be driven mainly by the building completion rate catching up with demand in the major eastern capital regions. But given continued strong population growth and foreign buyer interest, demand growth for housing is expected to remain robust, and, in the absence of a large inventory of vacant properties, prices should stabilise, rather than fall significantly.”
Positive outlook
In general, the IMF was positive on regulatory efforts to protect banks’ exposure to systemic risks in the housing market. The restrictions on interest-only loans and investor lending, and the homeowner grants and stamp duty exemptions recently implemented by several state governments, were all praised by the IMF as sensible measures to keep the housing market healthy.
Figures last month showed that Sydney’s house prices had slumped by around 6% in some areas, the first indications of a possible end to the property boom.
