This week we revise our house price forecasts slightly lower for 2013-15. We now expect 3-4% nominal house price growth in both ’13 and ’14 (from 4-5% previously ). Near term, we prefer Sydney and Perth, and would continue to avoid Melbourne.
Deteriorating labour market outlook and job insecurity may offset further rate cuts. We now expect rates to fall another 50bps this year (ending 2013 at 2.25%), however mortgage rates at 45-year lows will be attempting to offset unemployment that is moving slowly toward 6%. For the average Australian, buying a house is the single largest purchase decision they will make; hence job security is an important pre-requisite.
Personally, I worry that Perth prices will weaken soon.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
