HSBC Bank’s chief economist says rising auction clearance rates and the expected interest rate cuts planned for this year should lead to a recovery in the housing market in Australia next year.

HSBC chief economist Paul Bloxham says there are now some signs the housing market is starting to stabilise in the country. He pointed to the fact that sales at auctions are improving and a recent consumer sentiment survey suggesting households think it is an increasingly good time to buy a property.

“The housing market is also expected to be supported by cash rate cuts over the coming months, which should see mortgage rates fall, and a recent loosening of prudential settings by the authorities, both of which should support the flow of finance,” he said.

HSBC expects house prices to stop falling in the second half of 2019 and pick up in 2020, also supported by first home buyer subsidies and rising household incomes.

Bloxham said HSBC forecasts housing prices will either be flat or rise by up to 4% in 2020. National property prices have fallen by 8% over the past 18 months, with HSBC forecasting a peak-to-trough decline of about 10%.