House price growth will halve in Melbourne for the rest of the year according to a leading economist.
Well-known chief economist at HSBC Paul Bloxham thinks the national growth rate will slow from 9 per cent in 2015 to around 4-5 per cent this year.
Mr Bloxham says tighter lending standards, apartment oversupply and new taxation on foreign buyers will put downward pressure on Melbourne’s property market and will reduce house price growth in 2017 to less than 5 per cent.
“A cooling of the housing market is expected to leave the RBA with room to consider cutting its cash rate further in coming quarters, if needed,” he told The Age.
“Given the already strong gains in recent years in Sydney and Melbourne, the authorities have been seeking to cool the housing market in these cities.”
Healthy foreign investment has been a factor in keeping house price growth surprisingly strong, but new stamp duty and tax surcharges imposed on foreign buyers in Victoria, NSW and Queensland should see that interest stall somewhat.
“Foreign purchases could partly explain the recent ramp-up in Sydney and Melbourne housing prices,” Mr Bloxham told The Age.
“We expect recent increased taxes and changes to local bank lending practices are likely to weaken this source of demand in coming quarters.”