Despite affordability and supply issues, everything points to the property boom continuing …
Recently I talked about the Federal Government’s crazy decision to widen its 5 per cent deposit scheme as a way of helping first home buyers into the property market.
The reality is that the only way to solve the housing affordability crisis is to increase the supply of new homes coming onto the market. I know that means making hard decisions and all levels of government working together to foster building programs. But that’s the only solution.
So it’s frustrating, to say the least, when the very opposite keeps on happening.
Demand is being increased
What the government has done with widening this scheme is just plain naïve and puts political expediency ahead of finding real solutions. They have simply increased demand and ignored the supply problem.
As a result, we are seeing auction clearance rates over 75 per cent for most capital cities and buyers competing for a limited amount of stock on the market. And the boom Spring Selling Season hasn’t even really started.
That scarcity, along with falling interest rates, is fuelling a new property boom.
A FOMO property market
Cotality’s National Home Value Index (HVI) rose 0.7 per cent in August, the strongest month-on-month gain since May last year. The result pushed the annual change higher for the second month in a row, to 4.1 per cent.
According to Cotality, the growth cycle has been gradually building momentum since the February rate cut, with buyer demand spurred by a lift in borrowing capacity, real wages growth, rising confidence and what is likely to be a growing sense of urgency as advertised stock levels remain tight.
It’s a ‘fear of missing out’ (FOMO) property market and it does just that. Property values continue to soar and certain buyers, particularly first home buyers, are priced out.
What about supply?
Cotality’s research director, Tim Lawless, sums it up:
“Once again we are seeing a clear mismatch between available supply and demonstrated demand placing upwards pressure on housing values.”
The annual trend in estimated home sales is up 2 per cent on last year and tracking almost 4 per cent above the previous five year average. At the same time, advertised supply levels remain about 20 per cent below average for this time of the year.
The mid-sized capitals are once again leading the growth trend, with Brisbane (+1.2 per cent) and Perth (+1.1 per cent) recording the highest monthly gains. Adelaide wasn’t far behind with a 0.9 per cent lift in values.
Until governments work together to improve housing affordability – via increasing supply, not through smoke and mirrors incentives to make it ‘more affordable’ to buy, we will continue to have a housing shortage.
And a property market fuelled by increasing FOMO.
