Despite the Reserve Bank’s recent decision to start raising official interest rates and a cooling of the property market in many parts of the country, one of Australia’s most respected economists believes talk of a housing downturn is overblown.
Ray White Chief Economist Nerida Conisbee said we should expect a “calming of prices”, not a “free fall”, and that property values “aren’t likely to drop dramatically”.
Ms Conisbee pointed to six factors that could combine to reduce the supply of and increase the demand for housing, both of which could help to support property prices.
1. Home building costs are rising fast. As a result, some people will choose to buy an established property rather than build a new one. That will lead to reduced supply of new housing and increased demand for existing housing.
2. Rents are rising fast. That will incentivise some renters to buy their own home and lure more investors into the market, leading to more demand for property.
3. Population growth will increase. The number of people who left Australia during the pandemic was greater than the number of people who moved here. But now that the international border has reopened, we could expect a lot more expats to return and immigrants to arrive. Some of these new residents will be property buyers.
4. A new first home buyer incentive is being launched. The Albanese government has promised to introduce a Help to Buy shared-equity scheme for lower-income first home buyers. This will give a new group of people the ability to enter the market.
5. The economy is looking good. Economic growth is strong (3.3%, according to the latest data) and unemployment is low (3.9%). The stronger the economy, the more confidence people will have to buy property.
6. Some markets are resilient to rate rises. The Sydney and Melbourne markets are very sensitive to rate rises, because they’re so expensive, so it’s not surprising the most pronounced downturn has occurred in those two places. But other markets are cheaper and are therefore less affected by rate rises, which is why other cities are still in growth mode.
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