No End to Global House Price Surge
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No End to Global House Price Surge
The current residential boom is unlikely to bust thanks to housing undersupply, high employment levels and a strong economic forecast underpinning the market, according to new research.
House prices have increased 7.4% on the average globally with Canberra the best performing city in Australia, the Knight Frank Global Cities Index has found.
Turkey’s Izmir and Ankara along with Wellington in New Zealand took out the top places in the 150 city index, which reported on house price growth in 128 locations.
The report predicted three factors would continue to push prices up: a fear of missing out, locking in lower mortgage rates and an increase in household savings during the pandemic.
The house price growth rate in Australian cities was strong but not quite in the same league as other countries including New Zealand where prices jumped 19.6% to 30.1%, and Russia, up around 22%.
In the past 12 months house prices have increased at the fastest rate since the start of the global financial crisis.
“However, unlike during the last global recession, banks now operate under tighter lending rules, households are less indebted, the tapering of fiscal stimulus measures is not expected to bring about a sudden jump in unemployment,” the Knight Frank report said.
“With inflationary pressures deemed to be ‘transitory’, a sudden hike in interest rates looks unlikely, and the US Federal Reserve envisages it will be 2023 before it makes two small rises.”
In Australia, lending laws were relaxed during the pandemic while interest rates hit a record low at 0.10 per cent with the Reserve Bank forecasting the strong economic recovery will continue.
“Housing credit growth has picked up, with strong demand from owner-occupiers, including first-home buyers,” the board said in its latest statement.
“There has also been increased borrowing by investors.
“Given the environment of rising housing prices and low interest rates, the Bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.”
Meanwhile employment hit a record high at 13.37 million Australians were employed in June according to Roy Morgan.
Roy Morgan chief executive Michele Levine said the June results were compiled before the lockdowns.
“Before these lockdowns the employment trends were very good with employment increasing 305,000 to a record high of 13.37 million in June,” Levine said.
“Since bottoming in late March 2020, when the nation-wide lockdown was introduced, full-time employment has now increased by over 1 million and has increased every month since October when Victoria’s long second lockdown ended.”
Levine said the lockdowns in Victoria had had a negligible impact on employment rates, suggesting support measures there had been effective.
