Australian house prices are rising at the fastest pace since 1989, loans are likely to be limited

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By James Glynn


SYDNEY – Australian house prices rose at their fastest pace since mid-1989 in the year through September, stoking concerns about the growing risk of financial instability in the sector and pushing measures closer taken by the banking regulator to cool the market with restrictions on mortgage lending.

CoreLogic’s National Home Value Index rose another 1.5% in September, pushing Australian home values ​​up 17.6% in the first nine months of the year and 20.3% in the past 12 months.

Fueled by record interest rates and high household savings built up through generous fiscal stimulus to tackle the Covid-19 pandemic since early 2020, the pace of house price growth prompted the Council of financial regulators this week discuss the need for mortgage restrictions.

The Reserve Bank of Australia has also warned of growing systemic risks if house prices continue to rise.

The Australian Prudential Regulation Authority has successfully deployed so-called macroprudential tools during previous property booms to curb demand.

RBA Governor Philip Lowe recently ruled out using higher interest rates to slow house price growth, leaving APRA responsible for taking the lead in slowing the market.

The RBA’s advice to markets at this time does not foresee an interest rate hike until 2024.

The strength of house prices is an indicator of the underlying strength of the economy, even as the Delta strain of the Covid-19 virus slowed economic growth in the third quarter.

With major eastern states set to be released from lockdown in the coming weeks, a strong labor market recovery is expected in the final months of the year, with data this week showing vacancies remain well in the past. above their pre-pandemic levels.

CoreLogic Research Director Tim Lawless said that despite the continued rapid pace of house price growth, the market has surpassed its peak reached earlier this year as home affordability weakens. .

With home values ​​rising much faster than household incomes, raising a deposit has become more difficult for most market cohorts, especially first-time buyers, he said.

Sydney is a prime example where the median home value is now just over A $ 1.3 million. In order to collect a 20% down payment, a typical Sydney home buyer would need around $ 262,300, Lawless added.

Despite deteriorating affordability, home values ​​are still rising faster than apartment values, a trend that has been evident throughout most of the COVID period to date, particularly in capital cities, he said. -he declares.


Write to James Glynn at [email protected]

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