No end in sight for rising house prices

Supply constraints are expected to keep upward pressure on property prices well into the medium term.

The RP Data CoreLogic Home Value Index recorded flat house price growth across the country in September, but Australian property prices remain above trend, according to credit specialist La Trobe Financial.

“We are above trend, but not so far above trend that we can predict an imminent correction with confidence,” La Trobe Financial head of funds management Chris Andrews said.

“The indicators are still suggestive of a supply side shortfall, which will keep pressure on house prices at least until the medium term,” Mr Andrews said, adding that price corrections could never be ruled out in this market.

“But in our view, home purchasers are still going to face affordability challenges into the medium term,” he said.

While bearish commentators have highlighted the unusually high level of investor demand as a reason for the overall rise in home values over the past 18 months, low interest rates mean that the mortgage burden on borrowers is actually below average.

“With house price-to-income ratios still below their previous peak, there is a possibility that we may still be yet to see the high point of the property price cycle,” Mr Andrews said.

 

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