Australia’s house prices continue to surge, despite the COVID-19, and ANZ’s top executive has issued a chilling warning about what it means for you.
The supply and demand shortage that has driven house prices through the roof is unlikely to end any time soon and could easily spark an interest rate hike, one of Australia’s big four bank executives says.
ANZ chief executive Shayne Elliott says the current low interest rate levels have put home ownership front and centre in almost everyone’s mind.
That in turn has caused a major supply issue and sparked the surge in property prices across Australia, which has mainly been the only inflation within the economy, he says.
“It’s just asset price inflation,” Mr Elliott told 3AW’s Neil Mitchell on Thursday.
“There’s a lot of money sloshing around, which was partly to do with COVID, partly to do with other things.
“All that money has to find a home and people are pouring it into assets. And they’re pouring it into housing and also into equity.
“The Reserve Bank would, I imagine, be forced to act at some point. I mean, they’ve sort of said they’re not intending to do that for a couple of years but things change.”
The Reserve Bank met on Tuesday for its regular monthly meeting and left interest rates unchanged at a record low 0.1 per cent.
The RBA said interest rates would remain steady while inflation stayed below the target level of 2 to 3 per cent.
On the same day the RBA met, REA released its new Price Index Report showing values for houses along the eastern seaboard had risen by more than five per cent on average over the past 12 months, with the pandemic sweeping the nation from March last year.
The biggest gains were in Sydney where house prices jumped 6.4 per cent although apartment prices lagged behind at 0.1 per cent, according to the REA Price Index Report.
Brisbane’s house prices jumped 5.8 per cent while Victoria’s increase was 4.6 per cent.
Overall, house prices have increased 6.9 per cent on average over the past 12 months across the country, more than triple that of apartment values, which increased 2.1 per cent.
Australia’s inflation for the December quarter was 0.9 per cent, the RBA says.
REA’s director of economic research Cameron Kusher said rising consumer confidence was built on interstate borders reopening and would likely further improve as the COVID-19 vaccine rolled out.
“Price growth in capital cities has been stronger than in regional markets over the past two months so it will be interesting to see if this trend continues as vaccines roll out in Australia and we head towards a new COVID-normal,” he said.
Mr Elliott said homeowners may be grinning with the surge in house prices but there was a downside to it.
“If you’re an owner it probably feels pretty healthy. If you’re trying to get in, it probably doesn’t,” he said.
“I think extreme moves either up or down are never probably very good if they’re sustained for a period of time … because you start getting real social and political problems as a result.”
Besides house prices being a talking point during the pandemic, so has been the move away from cash, Mr Elliott said.
“Cash withdrawals fell 22 per cent over the year … but then contactless, so using your … tap cards, they are up 25 per cent,” he said.
Article Source: www.news.com.au
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