Oliver's Insights - Australian house prices on the rise again - is it sustainable?
This note looks at the outlook for Australian house prices.
The key points are as follows:
- After falling 6% from their peak, average capital city house prices have started to rise again in Australia. With the economic downturn turning out to be milder than expected (at least so far), the slump in mortgage rates has drowned out the impact of rising unemployment.
- While the house price correction has been headed off, with Australian housing remaining very expensive it’s hard to see the housing bubble starting up again. Additionally, with household debt levels remaining very high a re-ignition of the housing bubble (to the extent that it would have to be funded by even more debt) would be a worrying sign. The most likely outcome is modest growth in house prices at a rate below that in income levels (such that house prices continue to fall relative to wages).
