Price growth in Sydney houses, the hottest property market in Australia, is close to peaking, according to analysis by J.P. Morgan Australia.
The cost of housing in Sydney and Melbourne has been running ahead of the rest of the country. Sydney is up 17% over the last 12 months and Melbourne 14%.
However, according to a note to clients by J.P. Morgan, the simple average of price rises in Australia’s remaining capital cities has been essentially zero.
J.P. Morgan created a model to estimate how supply and demand dynamics will influence housing markets.
Here’s what the modelling forecasts:
“The model suggests price growth in Sydney is close to peaking, and will likely decelerate through 2016, finishing the year closer to 10%,” the note to clients says.
The same can be said for Victoria, with annual price growth projected at just 3% a year by the fourth quarter of 2016 financial year.
“These outcomes are consistent with idea that higher density dwelling prices will be hardest hit by supply changes,
and with both cities experiencing a surge in high-density dwelling construction in recent years,” says J.P. Morgan.
The numbers support UBS forecasts that housing price growth will see a “moderation of strength” and not a sharp downturn.
Regulatory authorities have been trying to slow the growth of loans for investment housing.
The growth rate of investment lending slowed from its recent peak of 11.1% in the 12 months to June, to 10.7% in the 12 months for August.
But that’s still faster the 10% “speed limit” APRA imposed on Australia’s banking sector for growth in investment lending.