The attached note provides a Q&A on the main issues around the housing downturn in Australia.

The key points are as follows:

  • Australian home prices are likely to fall another 5-10% this year driven by a further 15% or so fall in Sydney & Melbourne. We have revised our expected top to bottom fall for Sydney and Melbourne property prices to 25% (from 20% previously).
  • Tight credit, rising supply and falling price expectations are the main negatives.
  • Uncertainty around the impact of possible tax changes is likely also impacting investor demand.
  • The housing downturn will be a significant constraint on Australian growth. We expect the RBA to cut the official cash rate to 1% this year.

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