Strengthening house prices are a classic double-edged sword.
They’ve certainly created a shot in the arm for confidence, which we’ve seen in the latest ANZ/Property Council survey. They also help support a soft consumer sector from being even weaker and should shorten the housing construction trough, a critical issue for jobs and the economy.
The RBA is also watching closely, with Phillip Lowe indicating that concerns about a reheating housing market have influenced the decision to keep interest rates at their current levels.
The breadth of the price response and the strength of owner occupier market has been significant. This has been borne out in the rush from first home buyers to access the Federal Government’s loan deposit scheme which has been heavily subscribed in its first two months of operation.
However as prices build up momentum again, there are renewed warnings about housing affordability.
One of our key messages to policy makers is not to confuse weekly auction results with housing construction activity. As the RBA points out, construction activity is likely to continue to fall before it becomes an economic momentum driver for the economy once again.
The upshot is that reduced housing supply levels across our key markets makes Australia more vulnerable to declining housing affordability over the next couple of years.
This is a big challenge for governments at all three levels.
It also presents a big opportunity for the Federal Government to play a leadership role in delivering a plan for the longer term that helps all Australians have access to affordable and quality housing whether as tenants or owners.
We need to tackle housing affordability in a meaningful way, that meets the needs of a growing population, builds strong communities and helps our cities prosper. We need a stronger commitment of policy energy and imagination that survives beyond the political or news cycle.
The Property Council is uniquely positioned at the intersection of our industry, the political process and policy-making to bring new ideas and expertise to the issue. You’ll hear more from us in coming weeks on ways the Federal Government can be doing better in this area.