Westpac was the first major bank to tip rate rises ahead of the Reserve Bank’s current 2024 guidance, with Evans forecasting the first increase above the current historically low 0.1 per cent in early March 2023.
Other economists are preparing for the RBA to begin raising rates over 2023 and 2024 to a natural rate of about 1.25 per cent.
Westpac estimates rates any higher would place “significant stress” on household finances.
“We still expect the market to slow over the course of 2022 as macro-prudential policy; prospects of increased rates; and affordability reaching record lows triggers a correction phase that will begin in 2023 and is likely to extend into 2024,” Evans said.
“The combination of high levels of new building and slow population-driven demand may also weigh on some sub-markets.”
Corelogic research director Tim Lawless said the slowing growth conditions were the result of higher barriers to entry for non-home owners along with fewer government incentives to enter the market.
“With housing values rising substantially faster than household incomes, raising a deposit has become more challenging for most cohorts of the market, especially first home buyers,” Lawless said.
“Existing home owners looking to upgrade, downsize or move home may be less impacted as they have had the benefit of equity that has accrued as housing values surged.”
Housing credit has been growing at an annualised pace of about 7 per cent in recent months, more than double the rate of income growth.
According to data from the Australian Prudential Regulation Authority, the number of new mortgage loans where debt is at least six times greater than income lifted by 6 per cent in the June quarter.
Article Source: www.theurbandeveloper.com