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Dismal home lending figures and falling house prices has prompted investment bank UBS to downgrade its outlook on Australia’s property market, indicating national peak-to-trough falls of 14 per cent.
UBS analysts had previously predicted declines of 10 per cent. The forecast of a 14 per cent decline in house prices is set “even assuming the RBA cuts” and represents a doubling of the 7 per cent slump experienced thus far.
Tuesday’s ABS figures showed a near 20 per cent drop over the year, with investor loans down 47.8 per cent from its April 2015 peak.
Owner-occupier lending experienced a yearly decline of 16.2 per cent, while loans to investors fell 27.8 per cent.
“Worryingly, even first home buyers retracted sharply after previously recovering [albeit] holding a 16 per cent share of total loans, the highest since 2012.”
The home loan lending data is the worst since the global financial crisis.
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UBS said the royal commission made no material change to its forecast.
“The key lead indicator of our credit tightening thesis and home prices is home loans,” the economists wrote.
“December ’18 [figures] slumped a worse than expected 5.9 per cent month-on-month, [t]o the lowest level in five years.
“Separately, the trend of developer loans declined 25-30 per cent year-on-year, to the lowest level since 2014, but recent stability is a mixed sign for building approvals.
UBS echoed AMP and ANZ forecasts that Sydney and Melbourne declines will be closer to 20 per cent.
Reserve bank governor Philip Lowe was quick to point out last week that house prices in Sydney are still 75 per cent higher than a decade ago, while Melbourne prices are 70 per cent higher.
