HSBC Australia chief economist Paul Bloxham has stated that the Sydney home prices boom will cool off. Mr. Bloxham believes that the Reserve Bank of Australia will increase interest rates some time in 2016, which will invariably slow Sydney’s rising property values. "Sydney house prices are running at an unsustainable pace," he said. "Purchasers need to be very careful, because at some point there has to be some correction." The British multinational bank is projecting the property market to be flat rather than collapse to any extent. "The more Sydney house prices go up, the more likely it is that they will have to correct, and that's not necessarily a bubble," Mr. Bloxham said.
Property prices in Sydney have jumped 12.4 per cent in 2014. In March alone, property prices rose by 3 per cent. Economist are projecting that prices will continue to increase, especially considering a potential interest rate cut in the next few months. Another factor that may lead to a boost in property prices would be the Federal government’s decision to postpone balancing the budget until next year. "The government tried to tighten up fiscal policy last year when the mining boom was over," he said. "When growth in the economy is sluggish, that is not the time to tighten fiscal policy." Mr. Bloxham believes policy makers have learned from previous mistakes and will not attempt to tighten the government’s belt too quickly. "I do think we're likely to see that this year's budget will likely to be less damaging to confidence than we saw last year," he said.