Australia: Housing Investment turns down as prices respond to policy - Westpac

offered considerable support to GDP growth at the cost of affordability and potentially financial stability, according to the analysis team at Westpac.

Key Quotes

“Recently, both aspects of the story have changed markedly.”

“We expect the impact on GDP growth from residential construction will turn from a positive contribution of 0.35ppts in 2016 to a drag of 0.43ppts in 2018. This will however be partially offset by an improved contribution from non-residential construction (hospitals; schools; child care facilities; and offices) of around 0.58ppts. Pressure on foreign investors from stamp duty increases; funding restrictions from Australian banks; and Chinese authorities’ FX restrictions are likely to continue to weigh on future developments.”

“We have also seen a marked loss of momentum in house prices. 6 month annualised growth for Sydney has slowed from 22.4% in January to 4.8% in August, as estimated by CoreLogic. This is consistent with the 2015/16 episode, when macro-prudential policy was first tightened.”

“Price gains for housing continue to have a significant impact on households’ finances, with affordability concerns clearly apparent. This is another factor that will likely weigh on consumption over the year ahead.”