Why are Australian house prices still soaring?
House prices are still on the rise in Australia, with Melbourne reporting a quarterly home price growth of five percent and Sydney recording price increases of 3.5 percent in the same period. The Australian Bureau of Statistics recently valued the country’s housing market at approximately AU $6 trillion — but what accounts for this protracted boom? And can it last?
On the up and up
Since the end of 2008, real estate values in Sydney have rocketed up almost 95 percent, while Melbourne’s property prices grew an impressive 80 percent. The recent chapter of the continued boom has been driven, in large part, by what have been referred to as “record low” mortgage rates.
But is it sustainable?
Market analysis firm CoreLogic has said that the growth in house prices, particularly in Australia’s most desirable urban areas, cannot continue on this trajectory for much longer. "Household incomes, typically across New South Wales, are growing at about 4.5 per cent and we're seeing dwelling values rising at a little bit more than double that pace of growth," said Tim Lawless, the company’s head of Asia-Pacific research. "You wouldn't expect this cycle could really last that much longer."
Not a nationwide trend
It’s worth noting that the Aussie property market isn’t a miraculous growth story overall. Parts of western Australia have seen house prices tumble over the past few months. In Perth, for instance, home values have shed 7.1 percent so far this year. Conditions are largely the same in the Northern Territory, with Darwin recording a 6 percent slide. In these ‘resources-driven’ markets the drop in prices has been driven by a plunge in rental costs. Other mining towns in the north-west of the country have been similarly affected.
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