Australia’s property market continues to defy gravity following yet another rise in established house prices.
Following on from recent findings showing housing affordability declining over the March quarter, today’s official numbers from the Australian Bureau of Statistics confirm that prices climbed by one per cent across Australia to an average annual growth rate of 3.6% – well in excess of inflation over the same period.
While this is good news for consumer confidence and highly leveraged home owners, it is another blow for those who are on the margin of being able to afford their first home.
Predictions from many commentators of a “natural correction in the market” have clearly been proven wrong as growth continues in 7 of 8 capital cities across Australia.
Moreover, the traditional dampening effect that higher interest rates usually have on property values may be somewhat muted over this coming year for two reasons.
Firstly, Australia’s housing market continues to remain under immense pressure as the supply of rental housing fails to keep up with demand, sending vacancy rates to record lows.
In addition, Australia’s new home builders face ever increasing challenges in putting affordable homes on the ground which has resulted in the supply of new housing falling below underlying demand for the past 16 months.
While no-one wants large and rapid falls in house prices, pressure needs to be lifted off the housing sector by increasing the supply of affordable housing and attracting private rental investment. Lowering the cost of land and easing the tax and regulatory burden on Australia’s building community would be a step in the right direction.
By Simon Tennent, executive director of housing with HIA.*
