Westpac Sees Australia's Housing Slump as Short-Lived

Westpac, one of Australia's largest banks, has reported that the country's housing market is cooling down. However, the bank expects this slowdown to be short-lived.

In a recent note, Westpac pointed out that auction clearance rates in Sydney and Melbourne have dropped back to earlier-cycle lows, turnover has fallen, and new listings are starting to decrease. This mix of weaker momentum often shows up first in activity, with fewer homes for sale and completed deals resulting in less price discovery.

Westpac believes higher interest rates are still affecting confidence, even though mortgages remain available. The bank also expects the Reserve Bank of Australia (RBA) to keep rates unchanged at its upcoming meeting this month.

The RBA's target is not house prices, so Westpac doubts that the central bank will change course solely because housing looks soft again. Instead, the bank thinks the RBA will hold steady and see rate cuts arriving earlier than previously assumed beyond this year.