Australian property prices finished July 1.6% higher to be 14.9% higher than at the end of July 2020. House prices (17.7%) have outperformed units (7.1%) by a significant margin, with lifestyle preferences for more space amid WFH/lockdowns coinciding the with general shortage of detached housing relative to units.
Yet the rate of growth looks to be slowing in recent months. Even with current stimulus, increases at the rate of circa 30% per annum appear unsustainable. Now with interest rates anchored (as opposed to falling) and strong building relative to population growth (see my recent post on Housing Demand v Supply), the impetus has eased. There’s a strong psychological component driving prices at the moment, with many feeling the prospect of buying a home for under seven figures is rapidly disappearing. Could that change? Possibly. But it would likely need to come from a material shift higher in interest rates.
Most analysts’ (me included) outlook is for price growth to moderate as we approach the end of the year. That still leaves a gaping affordability gap and major pain for non-property owners at the time of fiscal/monetary stimulus in 2020. And no policymakers seem willing to tackle that problem. The social implication is increased social bifurcation and a gap between the wealthy (with multiple properties) and the rest. Younger adults without property-owning parents will struggle to attain home ownership it looks like, at least in ‘desirable’ locations or dwelling types.
Until next time.