Sydney property goes cold as 'Chinese capital flows fall'
www.first2move.com.au
Rapidly
cooling house prices in Sydney and the sudden withdrawal of Chinese investors
from the property market may lead the Reserve Bank to cut interest rates,
according to investment bank Credit Suisse.
Key points:
Chinese
capital flows closely correlated to Sydney property and point to an on-going
cooling of prices
Sydney
clearance rates now at the break even point where prices fall
Credit
Suisse argues the RBA may be under pressure to cut rates if Sydney property falls
as expected
Research
conducted by Credit Suisse's economics and equity teams found Chinese capital
flows are tightly correlated to Sydney housing prices, with movements impacting
property demand 12 months down the track.
"Over
the past few months, the Sydney housing market has not only cooled down, but
has arguably turned cold," Credit Suisse wrote.
"Over
the past year, Chinese capital flows have fallen considerably, in part
reflecting the impact of stricter capital controls.
"This
fall foreshadows weakness in NSW housing demand in the year ahead."
Auction
clearance rates are at price tipping point
In recent
months, preliminary auction clearance rates have drifted lower to 60-65 per
cent from about 75 per cent last year.
More
importantly revised auction clearance rates — accounting for late reported
results — have even dipped below 60 per cent.
"This
is a significant development because recent RBA analysis suggests that a 60 per
cent clearance rate is typically the break-even point for house price inflation,"
Credit Suisse noted.
"In
other words, house prices tend to fall when the clearance rate is below 60 per
cent."
While it is
difficult to pin-point the exact impact Chinese buyers have on price, Credit
Suisse said its modelling found that Chinese capital flows and real interest
rates predict roughly three-quarters of the variation in NSW property transfers
since 2010.
(Source:
Australian Broadcasting Corporation )
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