Australian Housing Market Hits 'Air Pocket', But Crash Not Expected
Westpac's chief economist, Luci Ellis, has described the current Australian housing market as an 'air pocket', rather than a crash. In a recent note, Ellis pointed to the dual effect of higher interest rates and tax changes from the May budget.
The bank's revised forecasts show that prices have declined across most capital cities over the latest month, with the pace of softening running ahead of Westpac's own late-June projections. Home loan credit enquiries have fallen back to late-2022 levels, with a monthly rate of decline of around 4%.
The Reserve Bank of Australia (RBA) is expected to hold the cash rate at 4.35%, with Ellis noting that the bank's remit covers inflation and employment, not housing prices. Westpac has revised its rate path, removing two hikes from its previous forecasts and projecting rate cuts to begin in August 2027.