Australian house prices keep climbing, attract watchdog’s eye

October 1, 2021

Australian house prices keep climbing, attract watchdog's eyeSYDNEY: Australian home prices extended their breakneck run in September with even coronavirus lockdowns in major cities doing little to cool the fever, though regulators look likely to crash the party as borrowing increasingly outstrips incomes.

Data from property consultant CoreLogic out on Friday showed national home prices rose 1.5% in September, matching August’s gain. Values were up a blistering 20.3% on last year, the fastest pace since June 1989.

Stay-at-home orders did nothing to stop Sydney prices jumping 1.9% in the month and 23.6% for the year. Melbourne was up 15% on a year ago, Brisbane 20% and Perth 18%.

The boom has been a windfall for household wealth and consumer confidence. The Australian Bureau of Statistics estimates household wealth surged a record A$735 billion ($531 billion) in the June quarter alone, driven mainly by property.

However, the pace of gains is forcing would-be buyers to borrow ever more to get a foot in the market, worrying policy makers. Median home prices in Sydney climbed A$196,000 in the year to September, or A$5,568 a day.

“With housing values rising substantially faster than household incomes, raising a deposit has become more challenging for most cohorts of the market,” said CoreLogic’s research director, Tim Lawless.

Regulators have signalled they will outline likely restrictions on bank lending in the next couple of months, including caps on debt to income.

The Reserve Bank of Australia (RBA), however, has dismissed calls to raise interest rates to restrain the market, arguing it would only slow the economy and cost jobs.

The central bank holds its October policy meeting next week and is certain to keep rates at a record low of 0.1%.

A dearth of supply is also underpinning the market with buyers snapping up properties almost as soon as they are listed. Advertised supply levels are 28% below the five-year average, while the number of sales is 25% above the average.

“Monetary policy remains accommodative of high housing demand,” concluded Lawless. “It is still very much a seller’s market.”

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