According to a Bloomberg report, Citigroup predicts that the downturn in real estate in Australia will hurt economic growth, and that prices will likely decline until 2019.
Housing prices across the country are expected to fall by 10% to 15% from recent highs, mainly in Sydney and Melbourne. According to Citi analysts led by Paul Brennan, it is likely that these cities are experiencing "slightly larger" declines than other cities.
Analysts noted, however, that this projected decline – potentially the largest in recent years – would reverse the overvaluation of previous years.
The report states that the economic slowdown will likely be a "prolonged but manageable adjustment", with "confusion in the most likely scenario".
The negative outlook is corroborated by the latest CoreLogic data, which shows that prices in Sydney fell 7.4% in October compared to the previous year, while those in Melbourne fell by 4%, 7%. Nationally, house prices fell 3.5% last month from 2017.
Given the state of affairs, it is possible that the weakening real estate market is pushing the central bank to keep interest rates at an unprecedented level until the end of the year. end of 2019.
Last week, the Governor of the Reserve Bank of Australia, Philip Lowe, said he was closely monitoring the cooling of real estate prices in Sydney and Melbourne, although the effects of Falling real estate prices are dampened by the strength of the economy and the labor market.
"Even assuming a continuation of the orderly correction of the housing market, the slowdown in housing construction, the expected slowdown in real estate credit growth and some spillover effects on consumer spending will weigh heavily on economic growth. "said Citi.
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