Housing downturn faster than expected - Westpac

The housing market has already turned down sharply, with sale prices dropping 2.6% since November and sales numbers now running at below pre-pandemic levels.

That’s important as the housing market is a key influence on households’ wealth and their willingness to spend, and ultimately the extent of demand-side inflation pressures, says Westpac acting chief economist Michael Gordon.  “That in turn could affect the extent of OCR hikes that will be needed to keep inflation in check.”

“The downturn in the housing market has been compounded by a tightening in loan-to-value limits since November, and changes to the CCCFA (or more accurately the Responsible Lending Code) which came into effect from December,” he says.

Following that tightening in lending conditions, new mortgage lending has fallen sharply, dropping by an estimated 9% in December  - after adjusting for normal seasonal variations.