Powered by MOMENTUM MEDIA
subscribe to our newsletter

Analysts brush off return to ‘boom time conditions’

The rebound in housing market conditions will be “far more constrained” than recent data has suggested, according to analysts.

The latest property price data from CoreLogic also revealed that national home values increased by 0.8 per cent in August – the first monthly increase since April 2017.

The national increase was driven by a 1.6 per cent rise in Sydney and a 1.4 per cent rise in Melbourne.

Home values have increased over three consecutive months in Sydney and Melbourne, rising by a cumulative 1.9 per cent and 1.8 per cent, respectively.

The rise in home values has coincided with a sustained nationwide increase in auction clearance rates, which have lingered above 70 per cent for the past three weeks.   

Advertisement
Advertisement

The pick-up in sentiment has followed the Reserve Bank of Australia’s (RBA) back-to-back rate cuts in June and July, the federal government’s tax deductions, and changes to mortgage lending guidance.   

However, according to chief economist at AMP Capital Shane Oliver, the improvement in sentiment won’t trigger a price boom.

“Our base case is that house price gains will be far more constrained than the 10-15 per cent [increase] implied by current auction clearance rates,” he said.

Mr Oliver said he expects tighter lending conditions and subdued economic activity to weigh on price growth.

“Compared to past cycles, debt to income ratios are much higher, bank lending standards are tighter, the supply of units has surged with more to come, and this has already pushed Sydney’s rental vacancy rate above normal levels and unemployment is likely to drift up as economic growth remains soft.

PROMOTED CONTENT


“[We] don’t expect to see a return to boom time conditions and see constrained gains through 2020 [of] around 5 per cent.”  

Mr Oliver’s sentiment was shared by Erin Kitson, director of structured finance at global ratings agency S&P, who said she also expects economic conditions to serve as a “handbrake” on price growth.  

“A lot of the positive announcements recently, particularly in rate cuts and the removal of the debt serviceability floor and uncertainty around property-related taxes will probably help on the demand side and particularly on access to finance,” she said.

“However, a more cautious household sector will still constrain the extent to which these factors help mount a recovery.

“We still have weak wage growth and a high level of household indebtedness, [so] I think that will act as a bit of a handbrake on property prices taking off again any time soon.”

[Related: Supply and demand ‘imbalance’ to trigger nationwide price boost]

Analysts brush off return to ‘boom time conditions’
Shane Oliver
mortgagebusiness

Are you a new-to-industry broker in the process of growing your business? Then there’s some great news: The Adviser’s New Broker Academy is back in 2021 and will provide you with essential insights into cutting-edge tools, strategies and processes to fast-track to success. Don’t miss your chance to attend. To secure your FREE place, visit newbroker.com.au now!

Charbel Kadib

Charbel Kadib is the news editor on the mortgages titles at Momentum Media.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

You can email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.

Latest News

Banks, mortgage brokers and lenders could receive sizeably larger bills for ASIC’s industry levies come January 2022. ...

Brisbane digital non-bank lender WLTH is set to open a $15-million capital raise, while signalling plans to drive its next scale-up phase an...

The major bank has agreed to provide a sustainability-linked loan to a Queensland beef producer in a “first” for the agriculture industr...

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

How long do you think it should take to discharge a mortgage?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.