RBA’s Fresh Face, Michele Bullock, Faces Housing Market Challenges
As the Reserve Bank of Australia (RBA) welcomes Michele Bullock into a key role, the Australian housing market finds itself at a critical juncture. With the primary responsibility of stabilising the currency, ensuring full employment, and fostering economic prosperity for the nation, the appointment of a fresh face could bring new perspectives to the table. However, amidst rising interest rates and a thriving housing market, Michele Bullock faces tough decisions in maintaining stability without hindering growth. This blog delves into the current state of the Australian housing market, analysing preliminary auction clearance rates and the growing demand for new dwellings, while also considering potential challenges and the government’s role in addressing them.
The recent increase in interest rates has generated uncertainty in the Australian housing market. While house prices continue to surge, the RBA must exercise caution in adjusting the cash rate. Lowering rates prematurely could lead to even higher house prices, exacerbating inflation. Conversely, raising rates too much might plunge the country into a recession, which is contrary to the RBA’s purpose.
Preliminary auction clearance rates have been on the rise, with the southern states displaying the most confidence. However, Brisbane and Canberra have not fared as well. The influx of homes for sale is notably higher in the southern states, which may be attributed to increased seller confidence, driven by growing demand. Sellers might also be attempting to enter the market before potential interest rate hikes dampen buyer demand, leading to downward price pressure. In the Sunshine Coast region, although new properties are coming up for sale, the supply remains significantly inadequate. This undersupply issue persists in many Australian capital cities, with prices rising by 1.3% last month and 0.4% so far this month.
According to a report by Matusik, the demand for new dwellings in Australia over the next five years is estimated to be approximately 227,000, a significant increase from the average of 147,000 in the past five years. However, the number of new dwellings under construction but not yet completed is only around 70,000, representing just 25% of the forecasted demand. This imbalance between demand and supply could potentially drive up prices for established homes and rentals, further worsening housing affordability.
The government must address the challenges posed by rising housing demand. The slowdown in construction works and the limited availability of land have hampered new dwelling construction. These issues, along with the increasing cost of building, have contributed to the undersupply in the housing market. Addressing these obstacles will be crucial in balancing the housing market and curbing unnecessary price surges.
As Michele Bullock takes on her role at the RBA, she faces the complex task of maintaining economic stability in the face of a thriving housing market. Striking the right balance in interest rates will be pivotal in ensuring sustainable growth without fueling inflation. Addressing the undersupply of new dwellings and controlling housing market fluctuations will require coordinated efforts between the government, industry stakeholders, and the RBA. By effectively managing these challenges, Australia can move towards a more equitable and resilient housing market that benefits its citizens and supports long-term economic prosperity.
In the local property news, we are thrilled to share some remarkable achievements. In a mere 5 days on the market, we successfully secured a solid sale for 5 Rose Gum Court. Furthermore, two other properties, one in Palmwoods and the other in Woombye, which underwent 3-week campaigns, have also attracted multiple offers and are set to go under contract today. These results reflect the strong interest and positive signs of buyer demand in the area. Looking ahead, with several other high-quality homes available for sale, it seems that keeping up with the growing demand over the coming months may present a delightful challenge.