Australia’s residential property prices likely to have decelerated further in Q1

Australia’s residential property price inflation is expected to have slowed further in the first quarter of 2016, given the private sector’s monthly data. Residential property prices are likely to have decelerated to 7.2 percent in the first quarter from nine percent in the last quarter of 2015, said Societe Generale in a research report.

The ABS’ series is likely to match the year-on-year rate, though with smaller 0.2 percent quarter-on-quarter growth as compared with the private sector series’ gain of 0.8 percent, added Societe Generale. Factors that are leading towards a slowdown in residential property price are rises in mortgage rates for housing investors and tightening of credit conditions.

The likely slowdown in residential prices might be positive news for the RBA and regulators, but it is quite uncertain if they will be too happy. Actually, the private sector data implies that house prices accelerated again in the second quarter, which is likely to have been due to the renewed rate cuts by the RBA in May.

Residential property prices are expected to continue to rise at higher rates throughout this year and slow down again in 2017, noted Societe Generale. With solid growth in multi-unit properties, the gap between price growth of attached dwellings and established house prices is expected to broaden.