Some analysts are warning that Australia’s multi-decade property boom may be about to end - though most agree that it won’t come this year.
Australia’s housing industry is experiencing record growth on the back of low-interest rates and the Federal Government’s HomeBuilder initiative. But according to experts, the boom isn’t mean to last - here are three reasons why.
1. House Price Increases are Outpacing Wage Increases.
House prices are rising significantly faster than wages currently - and workers aren’t likely to get a pay rise until unemployment falls considerably.
This means that under the current boom houses will eventually become so expensive that only a small group of Australians will be able to afford them.
Given that the current boom is being driven largely on the back of Owner-Occupier stimulus initiatives, the rate that this growth can continue is finite - and the current boom we’re seeing will slow in the mid-term.
2. Population Growth is Uncertain.
Economist Shane Oliver from AMP Capital has said that the collapse in population growth seen last year from the halt to migration could lead to a “shift from chronic undersupply of housing to oversupply, as long as population growth remains constrained.”
Oliver said that the shift would “be healthy in terms of improving housing affordability for new buyers and renters.”
3. Financial Regulators May Step in During the Mid-Term.
ANZ Economist Daniel Gladwell said that “as much as there are some benefits to rising house prices at the moment … I think it’s also worth keeping in mind where some of the downside risks may play out in the next 12 or 18 months.”
He said that for this reason, regulators would likely step in at some stage in the mid-term to curb lending activity.
Sources: ABC News, Housing Boom May be Halted by Regulators, Analyst Warn - Published 22/04/2021.
Financial Review, Housing boom slows as wave of homes hits the market - Published 23/04/2021.
Domain, Housing prices set to rise 13 per cent but boom unlikely to last - Published 20/05/2021.