Reading newspaper headlines of late, you’d be mistaken for thinking there was blood on the floor in Australian housing:
- “Chinese dream, Aussie nightmare in housing”, AFR, 30 March 2017
- “Housing correction ‘won’t be orderly’”, AFR, 7 April 2017
- “… a growing problem in Australia’s housing market”, Business Insider Australia, 3 August 2017
- “A grim property tale of two cities”, The Australian, 14 September 2017
- “House prices overvalued by up to 30 percent in Australia’s biggest cities”, ABC Online, 20 September 2017
- “Crunch time for Brisbane property market”, The Australian, 21 September 2017
But while the media has often adopted an alarmist tone, to date home prices have remained robust outside of resource hit Western Australia.
Indeed, for every reason for alarm a solution has quickly presented itself.
Mortgage rates have risen out of cycle for investors, but have fallen for owner occupiers and first-time buyers in New South Wales are benefiting from new grants and stamp duty reductions. Banks have tightened lending criteria, but new sources of capital have emerged in the form of Private Equity funds, overseas banks and other non-traditional lenders. Auction numbers and clearance rates have moderated, but growth in mortgage commitments suggest demand remains strong. Wage rate growth may be low, but full time employment is making a comeback and population growth, while not at New Zealand levels, is re-accelerating.
So far, Australia’s love affair with residential property continues. A word of caution however: future challenges may prove significantly more testing than those seen so far. The next 12-24 months will bring peak apartment supply volumes while the Reserve Bank of Australia edges closer to raising rates. Looking out further, unintended consequences of restricting bank lending and pushing mortgage lending toward non-traditional (and less regulated) lending sector may also emerge.