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RBA cuts start ‘mini housing boom’
Australia’s debt-fuelled housing price bubble is at risk of re-inflating from three rate reductions in five months, as the central bank struggles to balance low inflation and high household debt.
RBA cuts start ‘mini housing boom’
Australia’s debt-fuelled housing price bubble is at risk of re-inflating from three rate reductions in five months, as the central bank struggles to balance low inflation and high household debt.
Analysis from UBS Australia found home loans are the key indicator of home prices and credit growth, which has cumulatively risen by 12 per cent in just three months.
This has reversed a significant share of the 27 per cent peak-to-trough collapse from August 2017 to May 2019.
“When APRA and the RBA first eased and we changed our house price forecasts from falls to a modest rise, we noted the risk that they would reflate the housing market,” UBS said.
Start of a mini boom
Following coordinated policy easing from APRA and the RBA, home loan rebounds of 12 per cent in three months have led UBS Australia to state that the housing market is in a “mini boom”.
According to CoreLogic’s Tim Lawless, “although housing values are now consistently tracking higher, at least at a macro level, the national index remains 6.8 per cent below the October 2017 peak, indicating that buyers still have some time to take advantage of improved housing affordability before values return to record highs”.
In August, investor-purchased properties spiked in value by 5.7 per cent month-on-month, the most since 2016, UBS said.
Owner-occupier–purchased property values also rose by 1.9 per cent, with established, ready-to-go homes experiencing faster growth than those that need renovations, although they are also rebounding.
As a percentage of the market, first home buyers have also surged to a 19.6 per cent share, the highest since the GFC, the investment bank said.
However, volatile developer loans have still dropped, which UBS said indicates limited spillover from strong established housing prices to further weakening of new housing activity.
The investment bank has also forecast a further rate cut in November, which when combined with record-low uptakes on new loans means the market might only recover to 4 per cent year-on-year.
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