The stimulus to the housing market from predicted interest rate cuts by the Federal Reserve may be dampened by the US-China trade war, property-market experts warned.
The Federal Reserve cut rates last month for the first time in nearly a decade, and two more rate cuts are predicted this year. However, residential property prices are only expected to rise an average of 3% this year, according to a Reuters survey – the lowest projected rise since Reuters began quarterly polling for calendar 2019 in February of 2017.
While property prices are still expected to outpace inflation, market watchers doubt that the housing market will make any meaningful contribution to growth this year, Reuters reported. Property analysts and brokers surveyed by Reuters expected home prices to rise by 3% this year, 3.2% next year and 3.3% in 2021. Nearly 70% of analysts though that the risk to the housing market outlook was skewed to the downside, Reuters reported.
“The problem is that overall sentiment is starting to show some signs of weakness … so the fear is that issues outside the housing market are preventing a stronger recovery than otherwise would have been without the trade war,” Brett Ryan, Deutsche Bank senior US economist, told Bloomberg.
Meanwhile, a Reuters poll of economists and financial professionals found that most felt the yearlong trade war has increased the risk of a recession not just in the US and China, but globally. Nearly two-thirds said that the trade war would damage housing-market activity.
“Fears of an impending recession could dent consumer confidence, and housing demand would likely be the first casualty,” Scott Anderson, chief economist at Bank of the West in San Francisco, told Reuters.