House prices jump $52,600 in three months
House prices in Australia are currently 19% higher than before the pandemic hit our shores. The Reserve Bank of Australia isn’t planning on increasing interest rates for years to come.
Having housing prices continue to increase relative is not ideal for the average home owner, but the RBA doesn’t see its role as one of creating monetary policy to target house prices.
As it stands, the RBA will not consider lifting the cash rate until the annual national average wages growth is at least 3 per cent and inflation within 2-3%. Not before 2024 at the earliest.
One way of curbing housing prices indirectly however is through the influence of land value upon which the houses are being built. But is this enough?
In the June quarter of this year, there was an increase in property prices of 6.7% – the strongest quarterly growth since 2003. The mean price of residential dwellings increased by $52,600 in the same quarter, to hit $835,700.
The biggest growth was in Sydney at 8.1%, followed by Melbourne at 6.1% then Brisbane at 5.1%.
The RBA anticipates that once the current restrictions are eased, household spending will increase (people are not spending as much during lockdown). Record low interest rates means that money is cheap. However in the case of people coming out of lockdowns, it’s likely that they’ll be spending savings rather than credit.
The Australian economy was recovering well from last year’s pandemic hit but then Delta hit. The RBA says it expects the economy will now contract significantly in the September quarter. Further, it expects the economy to take longer to recover from the recent lockdowns. It is anticipated that the economy will grow again in the December quarter and potential be back to a pre-COVID trend by the middle of next year.
Reserve Bank Governor Phillip Lowe said that increasing rates of vaccination and easing of restrictions will play a fundamental role in how fast the Australian economy can recover.