Via Capital Economics:
- The stagnation in house prices in Australia in recent months is a big deal as it means housing won’t support the economy by as much as in recent years.
- The plunge in the number of home sales will continue to restrain spending on items like fridges and furniture.
- And the weaker price trend will contribute to a sustained period of unusually soft retail sales.
- The housing market is unlikely to go into free-fall, but we do expect prices to move sideways over the next year or so before falling by around 10% once the RBA starts to raise interest rates in the second half of 2019. That means the economy can’t rely on housing to provide a helping hand.
So what does this mean for the economy?