SYDNEY (CU)_As Australia begins to revive its economic activities with hopes that the worst of the COVID-19 pandemic is behind them, the return of investors, along with a fear of missing out, appears to be pushing prices in the housing market to a rate higher than expected. According to recent figures, property prices in the cities of Sydney, Canberra, Brisbane, Melbourne and Adelaide have outstripped the growth anticipated based on factors such as interest rates, rents, income and housing supply.
Meanwhile, the amount of outstanding home loans in the Pacific nation last month also grew by the fastest monthly pace in four years. According to recent data issued by the Reserve Bank of Australia (RBA), in May 2021, housing credit grew by 0.6 per cent, the highest rate since June 2017. The data also revealed that the annual growth rate, which stands at 4.8 per cent, is the highest since 2018.
Accordingly, Australia’s Council of Financial Regulators, which is made up of the RBA, the Treasury, the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission are said to be monitoring the developments in the housing market amid the rapid escalation of prices. Meanwhile, as buyers rush to secure home loans, the APRA has also written to the top banks in the country warning them of potential increased risk-taking.
According to Moody’s Analytics, provider of economic research on risk, performance and financial modelling, is of the view that the banking watchdog is on the verge of intervening in the heated housing market in order to cool the dramatic momentum particularly reported from capital cities.
Katrina Ell, senior economist at the Moody’s Analytics, noted that given the historically low lending rates, about 20 per cent of Australia’s population is under what is known as “mortgage stress”, which refers to situations where 30 per cent of the household income is utilised to settle mortgage payments. “An underlying concern is that when interest rates do eventually rise, highly leveraged households need to be able to continue servicing their loans, even if rate increases are forecast to be gradual,’ she said.
