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The NSW state government has laid out its predictions for how and when the current housing boom will run out.
The NSW state government has revealed its expectations for the local housing market as it looks to reform stamp duty in favor of a new land tax.
According to the NSW state government, annual house price growth in the state is expected to peak around late-2021.
“As higher prices encourage more owners to sell, this will work to limit house price growth over time. In addition, higher prices are expected to price out more potential buyers, weighing on demand,” the budget papers said.
“Speculation has emerged around the potential for renewed macro-prudential tightening by regulators in response to growing house prices. However, the concentration of lending growth in owner-occupier loans (rather than investors) suggests the current market conditions are less likely to evoke a response from regulators.”
In the short term, the budget papers reveal that a significant macro-prudential tightening is assumed to be unlikely.
However, they do note that “higher interest rates anticipated for 2024 as the Reserve Bank of Australia tightens monetary policy will accentuate the weakness in demand for housing construction”.
The budget noted that activity in the residential construction sector remains strong, “fuelled by higher house prices, ongoing policy support and low interest rates”.
“That said, building approvals are now running well ahead of the change in population, which is depressed due to the lack of inward migration. This suggests a potential oversupply in the near term relative to the underlying demand for housing.”
The budget papers predict that demand for renovations will fall in 2020, once international travel resumes and the influence of the federal government’s HomeBuilder scheme fades.
The state government’s predictions are echoed by Westpac, who revised earlier its position in May and suggested that the Reserve Bank will move to slow growth in the first half of 2022.
The bank is now forecasting a slim 5 per cent growth in prices by 2022 before the market completely stalls in 2023.
Budget is defined as the estimation of expenses made over a specified time for the purchase of goods or services.
Property refers to either a tangible or intangible item that an individual or business has legal rights or ownership of, such as houses, cars, stocks or bond certificates.