Shane Oliver, Head of Investment Strategy and Economics and Chief Economist, AMP Capital, with the note:
Key Points:
- Australian home prices are currently in a cyclical upswing which likely has further to go into 2022.
- However, the longer-term bull market, that has seen above trend growth in property prices since the mid-1990s, may be close to an end as the long-term decline in interest rates bottoms out, property undersupply swings towards oversupply & the “escape from the city” phenomenon takes pressure off city property prices.
- This may at least take some pressure off average capital city property price growth in the decade ahead.
Introduction
The Australian housing market is booming. Prices are rising sharply, auction clearance rates are very strong, sales are surging, and housing finance is around record highs. This is being driven by record low mortgage rates, multiple home buyer incentives, economic and jobs recovery, pent up demand, activity associated with a desire to “escape from the city” and an element of FOMO (fear of missing out). Forecasts for prices to rise 15% to 20% in total across this year and next now seem consensus. So here we go again with yet another cyclical property boom against the backdrop of poor affordability and high debt levels! Of course we all know this, but how does the latest upswing fit in the context of the long-term or secular swings in the Australian property market?
