Warning on house prices

HOUSE prices are now likely to slide 14 per cent nationally as the pool of credit offered to would-be home buyers shrinks faster than expected, analysts say.

And in Melbourne and Sydney, the peak-to-trough slump in property prices is likely to be closer to 20 per cent, according to UBS economists. The investment bank’s economics team, led by George Tharenou, says it is now “even more bearish” on house prices.

The UBS report to investors came as the Australian Bureau of Statistics yesterday revealed the value of home loans offered by lenders, setting aside refinancing, fell by 5.9 per cent in December, seasonally adjusted. It was dragged down by an 8.2 per cent slump in the number of lending commitments to would-be owneroccupiers, to about 32,100.

The value of home loans offered to owner-occupiers fell 6.4 per cent to $12.5 billion over the month and by 16.2 per cent over the year to December.

Including refinancing, total owner-occupier lending commitments still fell 6.1 per cent in the month to 48,690.

UBS noted the big slide in loans to investors continued — down 27.8 per cent in the year to December.

“Worryingly, even firsthome buyers retraced sharply after previously recovering, albeit holding a 16 per cent share of total loans, the highest since 2012,” Mr Tharenou said in a report for investors.

The proportion of loans going to property investors had fallen from a record high above 40 per cent in 2015 to 28 per cent now, he said, still high by global standards.

Mr Tharenou said the final report for the banking royal commission did not recommend any changes that would be material for the market.

Separately yesterday, National Australia Bank dumped its forecast for a rate rise next year. NAB had tipped a rate rise late in 2020.

In a report for investors, chief economist Alan Oster said the next move could well be down, potentially as soon as the second half this year.