Via Capital Economics:
The severity of the slump means that housing affordability has already improved substantially and will improve further if the RBA cuts interest rates over the coming months. New housing supply has dried up and the regulatory authority has indicated that it will loosen lending restrictions.
We have been arguing that house prices aren’t as overvalued as the surge in the house price to income ratio over the last few decades would suggest. That’s because of a structural decline in interest rates and rental yields.
