ANZ economists don’t believe the recent uptick in house prices will result in a full-blown resurgence, and think that prices will be capped to a degree by affordability constraints and various measures proposed by the new Government.
In their weekly Market Focus publication the economists reiterate their earlier view that a number of opposing forces are likely to see house prices effectively stay ‘on ice’ for the foreseeable future.
“All else being equal, we expect this to be a headwind for consumption growth going forward, although perhaps to a lesser extent than history would suggest, given that the softer housing market has not been driven by a turn in the interest rate cycle, but rather by a more restrictive credit landscape, including macro-prudential policy.
“Nevertheless, with the household saving rate having deteriorated over recent years (to an unsustainable level in our view), weaker house price performance is expected to see households look to rebuild precautionary saving, and this will be a headwind for overall activity growth,” the economists say.
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