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Economists dismiss predicted 7.5% fall in house prices next year

14 October 2015

Economists have slammed recent claims there could be a drop of up to 7.5 per cent in house prices next year. 

Earlier this week Macquarie predicted a drop in house prices of 7.5 per cent across the country in 2016.

Domain Group senior economist Andrew Wilson told The Age house prices haven’t dropped nationally more than 5 per cent in any year in the last decade. 

“Even in periods where we had prices falling, such as during 2008 when it was the global financial crisis, the national house price fell by just under 4 per cent after a significant period of higher interest rates,” he said.

“It would be an historical first and is unbelievably unlikely.”

Mr Wilson said Melbourne’s property prices were more likely to moderate and then slow, rather than actually decline. 

If property prices did fall by 7.5 per cent next year it would mean they come back to their level at the start of 2015 because nationally to June this year prices have increased by 7.9 per cent.

HSBC chief economist Paul Bloxham said not only does he expect prices not to fall by 7.5 per cent, he expects to see prices continue rising, by up to 6 per cent nationally in 2016.

“Prices will continue to rise in Australia, supported by continued low interest rates and the fact there is still an overall under-supply of housing to be worked off, particularly in NSW,” he told The Age. 

Mr Bloxham said he doesn’t expect the construction industry to decline and that it will remain a positive contributor to economic growth in 2016, even as house price growth slows. 

“If interest rates start to rise, we think that would have a dampening effect on house price growth, but we don’t think they’ll grow until 2017 and maybe beyond that.”

“We’re in for a long period of stable interest rates.” 

“Our view is that Australia’s economy is doing fairly well, growth is realigning, at some point in time house price growth does need to slow down.”

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