Australia has seen a bullish housing market across its capital cities as house prices on average surged by 10% this past year reaching a 32 year high in March.
At the beginning of the pandemic Australia was just emerging from a recession and unemployment was at a high and there was a strong housing supply boosted by the federal government’s Homebuilder program, based on theory, property prices should have been at a low.
However, the demand-supply dynamic turned on its head, as the country saw new entrants, especially first home buyers storm the markets following record low-interest rate, ongoing stimulus programs like job keeper, and government programs encouraging first home buyers.
The ratio of sales to new listings was tracking at 1.1, implying for every new listing added to the market, 1.1 homes are sold.
Will the trend continue?
The Westpac consumer sentiment survey “Time to buy a dwelling” which has been tracking the housing market since 1970 is down almost 20%. Further the federal government’s National Housing Finance and Investments Corporation forecast affordability problems flowing on to renters as supply continues to decrease.
Regulators such as the RBA and APRA have been hesitant to intervene, however, longer-term issues of lower population growth due to closed international borders, continued unemployment, and volatility of the vaccine distribution is expected to curb the ongoing boom.