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The key to housing affordability lies in boosting construction activity, not raising rates
When the RBA lifted the official cash rate to 4.5 per cent earlier this month, it said house prices had been “continuing to increase over recent months”.
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Specifically, the RBA observed that the market for established dwellings still had “considerable buoyancy”.
In fact, house prices jumped an average of 20 per cent across all capital cities in the year to March – the biggest jump in 20 years, according to ABS figures.
Throughout the March quarter, median house prices increased 6.7 per cent in Melbourne, 5.3 per cent in Sydney and 5.4 per cent in Canberra. Brisbane, Adelaide and Perth enjoyed more subdued price growth at 2.0, 2.7 and 3.5 per cent respectively.
BIS Shrapnel chief economist Frank Gelber says property price growth is just the beginning: the cycle still has three to four years left to run.
And as house prices are expected to climb for several more years, it is anticipated that affordability will get a lot worse.
But interest rate rises are not the answer to cutting down prices.
High market prices are needed to help stimulate growth in the construction sector. The RBA’s decision to hike the official cash rate three times this year may adversely impact the level of construction activity across the nation.
If the RBA further lifts rates on the back of rising house prices to curtail the house price boom, it may stall activity in the construction sector and the issue of supply will worsen.
Mr Gelber says the country is currently building about 140,000 dwellings each year – well down from the underlying demand of 190,000.
Urban Taskforce’s Aaron Gadiel says as long as the supply of new homes is restricted, there will continue to be upward pressure on housing pricing and affordability.
“Interest rate increases won’t change this,” he says.
PRICES AND INDICATORS
LATEST FIGURES
DARWIN
Median house price: $565,813
Quarterly growth: 7.50%
Annual growth: 17.32%
Average annual growth: 15.03%
Median weekly rent: $675
Gross rental yield: 6.20%
Median unit price: $424,903
Quarterly growth: 5.39%
Annual growth: 21.50%
Average annual growth: 15.39%
Median weekly rent: $455
Gross rental yield: 5.57%
PERTH
Median house price: $525,626
Quarterly growth: 0.58%
Annual growth: 7.58%
Average annual growth: 11.20%
Median weekly rent: $395
Gross rental yield: 3.91%
Median unit price: $496,763
Quarterly growth: -1.10%
Annual growth: 7.58%
Average annual growth: 12.28%
Median weekly rent: $388
Gross rental yield: 4.06%
BRISBANE
Median house price: $482,391
Quarterly growth: 2.15%
Annual growth: 6.05%
Average annual growth: 9.80%
Median weekly rent: $369
Gross rental yield: 3.98%
Median unit price: $363,549
Quarterly growth: 3.75%
Annual growth: 8.68%
Average annual growth: 9.48%
Median weekly rent: $344
Gross rental yield: 4.93%
SYDNEY
Median house price: $648,342
Quarterly growth: 5.66%
Annual growth: 12.03%
Average annual growth: 2.48%
Median weekly rent: $496
Gross rental yield: 3.98%
Median unit price: $488,709
Quarterly growth: 3.89%
Annual growth: 10.12%
Average annual growth: 3.36%
Median weekly rent: $498
Gross rental yield: 5.30%
CANBERRA
Median house price: $556,671
Quarterly growth: 4.07%
Annual growth: 13.81%
Average annual growth: 7.25%
Median weekly rent: $497
Gross rental yield: 4.64%
Median unit price: $439,842
Quarterly growth: 2.12%
Annual growth: 14.40%
Average annual growth: 9.57%
Median weekly rent: $428
Gross rental yield: 5.06%
MELBOURNE
Median house price: $548,138
Quarterly growth: 6.33%
Annual growth: 17.38%
Average annual growth: 7.40%
Median weekly rent: $357
Gross rental yield: 3.38%
Median unit price: $439,369
Quarterly growth: 5.05%
Annual growth: 16.34%
Average annual growth: 7.03%
Median weekly rent: $345
Gross rental yield: 4.09%
ADELAIDE
Median house price: $452,820
Quarterly growth: 3.52%
Annual growth: 8.69%
Average annual growth: 8.18%
Median weekly rent: $341
Gross rental yield: 3.92%
Median unit price: $369,913
Quarterly growth: -0.26%
Annual growth: 7.21%
Average annual growth: 10.49%
Median weekly rent: $328
Gross rental yield: 4.61%
MORTGAGE INDICATORS
LENDING FOR HOUSING – SEASONALLY ADJUSTED
March 10: $13.534 billion
Change from February 10: Decreased by 3.4%
Change from March 09: Decreased by 23.1%
AVERAGE NEW OWNER OCCUPIER HOME LOAN
March 10: $281,400
Change from February 10: Increased by 6.7%
Change from March 09: Increased by 5.8%
FIXED RATE LOANS AS PERCENTAGE OF OWNER OCCUPIER LOANS
March 10: 2.1%
Change from February 10: No change
Change from March 09: Down by 0.4%
FIRST HOME BUYERS AS PERCENTAGE OF OWNER OCCUPIER FINANCE COMMITMENTS
March 10: 16.1%
Change from February 10: Down by 2.0%
Change from March 09: Down by 11.3%
BUILDING APPROVALS
TOTAL DWELLING UNITS APPROVED
March 10: 16,383
Change from Feb 10: Increased by 15.3%
Change from Mar 09: Increased by 51.6%
TOTAL PRIVATE SECTOR HOUSES APPROVED
March 10: 9,779
Change from Feb 10: Increased by 0.5%
Change from Mar 09: Increased by 29.7%
TOTAL PRIVATE SECTOR OTHER DWELLINGS APPROVED
March 10: 4,558
Change from Feb 10: Increased by 59.9%
Change from Mar 09: Increased by 56.0%
