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Australia’s scorching hot living will be hotter, affordability will deteriorate

The Sydney Opera House and the city center skyline can be seen in Sydney, Australia on February 28, 2020. REUTERS / Loren Elliott

  • cpurl: //apps.cp./cms/? pageId = house-poll-survey data
  • Reuters survey chart on the outlook for the Australian housing market: https://tmsnrt.rs/3k1UZpD

BENGALURU, Aug. 19 (Reuters) – Scorching Australian house prices will continue to heat up this year and next thanks to extremely low borrowing costs and the lack of available housing, making affordability even worse, a Reuters poll found.

Since the coronavirus pandemic began, the Reserve Bank of Australia has cut its interest rate to a record low and flooded the financial system with cash, a powerful stimulus for one of the world’s most expensive real estate markets.

House prices have nearly doubled across the country and in Sydney and Melbourne, the country’s two largest cities, have more than doubled since the 2007-09 global financial crisis, but wages have lagged far behind.

As in other major housing markets, this accelerating trend has created a gap between those with significant savings who are already sitting on a pile of home equity and those who are struggling to climb the real estate ladder.

“Very low interest rates and other forms of monetary support have certainly lowered mortgage rates since the pandemic began. It has made housing more affordable for some buyers who are sure to take advantage of it, ”said Sarah Hunter, Chief Australia Economist for BIS Oxford Economics.

With the RBA saying interest rates probably wouldn’t rise from near zero until 2024, house prices rose 17.0% this year and 6% the next, according to the Reuters survey of 12 real estate market analysts August 11-18. 2% increase.

In a May survey, these median forecasts showed significant increases from 10.5% to 5.0% this year, despite virtually no immigration – a pivotal point in the economy.

AFFORDABILITY

There are many reasons why prices will continue to rise and outperform overall inflation even if transactions are relatively low, and only two of the analysts surveyed forecast prices to decline, both in 2023.

“Households have built up significant surpluses and the preference shift towards single-family homes has continued. Associated with this, the supply of real estate in the market remains relatively low, which means that demand exceeds supply,” said Hunter.

This has made affordability an increasing concern for the majority of first time home buyers as prices have soared beyond their reach.

Seven out of eight analysts who answered a question about affordability over the next two to three years said it was going to get worse. Only one said it would get better.

“As house prices continue to rise, it becomes more difficult for people who don’t have a home and of course those who do benefit,” said Peter Munckton, chief economist for the Bank of Queensland.

“How do we make sure there is (affordable) housing? We have not yet resolved the supply-side problem and one of the long-standing problems in Australia is that we have probably underinvested in infrastructure. “

House prices in Sydney and Melbourne – cities that account for about 43% of the country’s gross domestic product – are set to rise 20.3% and 15.5% respectively this year.

Brisbane, Adelaide and Perth were expected to grow 17.0%, 14.0% and 12.0%, respectively.

Those Brisbane and Adelaide projections were big improvements over the previous survey, although prices should rise by about half those prices next year.

According to analysts, the spread of new coronavirus variants and high unemployment remain the biggest downside risks for the housing market.

When asked about the risk that the recent round of lockdowns would slow Australian house prices, six of the nine analysts who responded said it was low. Only three said high.

(For other stories from Reuters’ quarterly real estate surveys 🙂

Reporting by Vivek Mishra; Survey by Md. Manzer Hussain; Adaptation by Ross Finley and Alison Williams

Our Standards: The Thomson Reuters Trust Principles.

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