Home loans, prices, and sales are all predicted to slump – one of them by 40%
With the Reserve Bank set to raise the interest rate another half-percentage point today, Swiss-based global investment bank UBS has forecast the collapse of Australian home loans by up to 40% in the coming months.
In addition, UBS chief economist for Australia, George Tharenou has calculated a slump in house prices by at least 10% and in home sales by more than 20%, consistent with the “lagged impact” of prior RBA tightening cycles.
“It’s plausible the weakness [in] loans is greater given the speed and magnitude of RBA hikes is set to be bigger this time,” he was quoted as saying in the Australian Financial Review.
While data showed new home lending rising above market expectations to $32.4 billion in May, the Australian Bureau of Statistics has warned that the positive results were primarily due to April housing loan application backlogs finally being processed.
“Public holidays, Easter in close proximity to ANZAC day this year, as well as school holidays, led to reduced processing of housing loan applications,” said Andrew Hanlan of Westpac.
After ABS revised data to reflect market adjustments, the total value of housing finance for 2022 to date is down by 1.2%, with financing to owner-occupier down by 3.7%. Hanlan expects these numbers to dip further with the rollback of fiscal and monetary stimulus.
Read more: Australia housing crash – what could make it happen?
RateCity director Sally Tindall has likewise anticipated a drop in the value of new home loans as the property market cools, saying many Aussies who were looking to buy a home have now hit ‘pause’, waiting for prices to drop before striking a deal.
The latest Melbourne Institute monthly inflation gauge also pointed to a “very strong” headline CPI result for the June quarter, the Financial Review reported, which economists have predicted would play into the central bank’s interest rate hiking cycle and eventually pull the median rate to 2.35% by December.
Read next: Single or double-shot rise for the official cash rate?
Fuel prices remain close to the all-time highs they recorded in late March, with the average family spending $295.54 a month to fill up the car.
