With rate cuts around the corner, uncertainty around the housing market continues to brew. Although CoreLogic’s Home Value Index (HVI) recorded only a modest gain of 0.3% in October, it still serves as the 21st month of consecutive growth since the market began its recovery.
Although hitting a new high of $11tn, the residential property market’s momentum has been stalling since the early phases of the current upswing. With the total value having risen by $900bn over the last year, investors are believed to be the most significant contributor, making up 38.6% of new home loans. Nowadays, a pivot towards more affordable markets has been manifesting amidst a combination of lower borrowing capacity, affordability challenges as well as a higher-than-average number of prospective buyers in the market. Nonetheless, with Monetary Policy being forecasted to loosen by early next year, ambiguity around the market’s outlook remains. Historically, there has been a strong correlation between falling interest rates and rising house prices, with house prices having risen by 0.6% on average following a rate cut. However, given household debt levels are already at record highs and wage growth remains sluggish, demand in the property market may not be as strong as forecasted. Nonetheless, this is contradicted by limited supply of housing may see house prices continue to rise.
Therefore, this informs an outlook on the housing market to continue experiencing growth, but a gradual loss of momentum and increasing diversity across cities and regions.
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