Dwelling prices to grow this year

By webmaster 13 January 2012 | 1 minute read

Back to back rate cuts in November and December could stimulate property price growth, the Housing Industry Association (HIA) has claimed.

According to the HIA’s latest economic report on dwelling prices, the favourable movement in interest rates combined with other factors ensure the Australian housing market is underpinned by strong fundamentals.

“In our last note on dwelling prices (August 2011), at a time when the Reserve Bank had just come within a whisker of raising interest rates, HIA outlined its long-held view for a flat to modest downward trajectory in dwelling prices and noted that based on fundamentals Australian dwelling values in aggregate were unlikely to decline by any more than 5 per cent. Since our August note, we’ve seen a negligible softening in prices in August, September and October, followed by the modest improvement in November,” HIA senior economist and report author Andrew Harvey said.

“In light of the two interest rate cuts, and the potential for more cuts in the pipeline, HIA believes that there is now the prospect of a return to house price growth at some stage in 2012.”

According to Mr Harvey, Australia possesses a large housing shortage.

HIA’s Housing to 2020 report estimates that the national dwelling shortage stood at 229,500 dwellings as at June 2011, a figure broadly in-line with research by a large number of institutions.

In addition, Australian borrowers remain highly able to meet home loan repayments and consumers have been saving at high rates (up to around 10 per cent of their income compared to negative 2 per cent of their income prior to the GFC).

“This means that many potential home buyers would now have access to considerable savings which could be used as a home deposit should they wish,” Mr Harvey said.

“Although new home lending has been disappointing, lending for existing properties has been trending upwards which augers well for buyer activity over the next nine or so months.”

Dwelling prices to grow this year
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