With demand greatly outweighing supply, houses are selling well over reserve at auction and recent COVID-19 restrictions have affected property sellers’ willingness to go to market.

While this property boom strengthens some sectors of the economy, there are numerous economic implications. With houses skyrocketing in price, Australians yet to enter the market are seeing their chances of buying a property grow slimmer.

However, there is still high activity in the market for those with the capital to spare. But with higher prices comes higher property loans, as Australians are borrowing more in order to secure a property. Around 22% of all borrowers are now taking out loans that are six times larger than their annual income.

Government bodies are starting to intervene. The RBA has warned that this increase of housing debt poses a risk to financial stability in the Australian economy. Treasurer Josh Frydenberg has met with financial regulators APRA and RBA to discuss measures against housing debt increasing further, to ensure the economy remains stable.

Even the IMF has weighed in on the current housing situation in Australia.

“Structural reforms to boost housing supply and targeted support for low-income households are needed to improve housing affordability … Macroprudential policy should be tightened and lending standards closely monitored.”
- statement from IMF

What does this mean for you?

These measures are predicted to impact investors more than home buyers, as the former are more likely to own multiple properties and therefore have a higher housing debt.

Property prices may begin to stabilise as financial regulators intervene to reduce Australia’s housing debt, putting an end to the intensity of the market as seen over the past year.

References

Derwin, J. (2021) Australia is set to restrict home loans to new borrowers in a bid to lower risks in the hot property market. Business Insider Australia.

Simpkins, S. (2021) Australia needs housing reforms: IMF. Mortgage Business.

9 News. (2021) Treasurer planning to ease financial burden of home loans. 9 News Australia.

Mar 10, 2024

Borrowing Capacity Index – February 2024

Loanscape has today released its Borrowing Capacity Index for Q2/2024. It shows that the borrowing capacities of Australian individuals and families have stabilised after the sharp decline over the past 2 years. Lower income borrowers continue to be disproportionately impacted by interest rate increases: the family income required to qualify for the average size loan in Australia is 35% higher than 2 years ago.

Mar 8, 2024

Market Essentials - March 2024

Combined dwelling values have re-accelerated across the nation in February, with all mainland capitals soaring in value. It probably comes as no surprise that Perth claimed the top spot by gaining a whopping 1.8% for the month

Dec 8, 2023

Borrowing Capacity Index – November 2023

Loanscape has today released its Borrowing Capacity Index for Q1/2024. It shows that the borrowing capacities of Australian individuals and families continue to decline. The more modest decline in the size of average loans being taken confirms that lower income borrowers are being disproportionately impacted by interest rate hikes: the family income required to qualify for the average loan in Australia is now 32% higher than 18 months ago.

Nov 19, 2023

Market Essentials – November 2023

The end of the year is fast approaching, with most capitals experiencing a strong recovery on dwelling values from the downturn that culminated at the start of 2023.

The recovery is mainly due to an influx of immigration and constricted supply, which the Government is trying to remedy with its ambitious goal of building 1.2 million homes by 2029 through HAFF.

Nov 18, 2023

Market Essentials – October 2023

In this months report, the $10bn Housing Australia Future Fund (HAFF) has finally passed the Senate after the Labor Government struck a deal with the Greens to add another $1bn for public and community housing. The HAFF plans to build 30,000 social and affordable homes in the next five years; though, national spokesperson for Everybody’s Home, Maiy Azize says it won’t solve the existing “shortfall of 640,000 homes”.

Market Essentials – September 2023

In this months news, CoreLogic’s Mapping the Market tool shows rent values rose in over 90% of Australian markets over the last 12 months, with Adelaide and Perth’s suburbs topping the list.

In response, the National Cabinet has introduced new measures to counter the rising housing crisis, including a New Home Bonus, a Housing Support Program and a National Planning Reform Blueprint.

It has also agreed to A Better Deal for Renters, which will streamline renters’ rights across the nation with consistent policies for eviction grounds, rental standards and limits on rent increases.

Finance and Property News and Commentary

What does this mean for you?

References

Loanscape

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