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Oz: House prices on the up

Thursday, March 11, 2010

Source: Catherine Deshayes

The slow pace of house-building in Australia, combined with a rapidly growing population, could Force house prices ever higher in future, the R.B.A. has warned.

Phillip Lowe, assistant governor of the R.B.A., says that if the nation's population growth remains strong, more of the economy will need to be focused on housing, presenting challenges both to labour markets and governments.

"If this does not happen, further adjustment in housing prices and rents is likely to occur to balance supply and demand," Lowe says.

The price of an average home in Australia rose 13.6% in 2009, driven by the strong economy, increased population growth and a lack of suitable properties.

"With population growth above average and growth in housing stock below average, there has been upward pressure on housing costs, resulting in people economising on housing services," Lowe says.

A result of the lack of housing can be seen in the trend of young adults staying in the parental home longer and a rise in the number of people sharing accommodation.

But if Australia is to meet the growing demand for new housing, it must ensure that planning guidelines and infrastructure provision can accommodate this, says Lowe.

In recent years the rate of increase in the number of dwellings has been below the average of the past 50 years. In contrast, the rate of increase in the population has been around the fastest in 50 years.

Mr Lowe said that despite above-average slice of the nation's gross domestic product focused on dwelling investment, there remained slow growth in the number of new homes.

Managing these competing demands and ensuring the adequate supply of workers with appropriate skills will be a challenge, Lowe says.

Source: www.thinkingaustralia.com