house prices

How house prices in Australia will rocket by 30 per cent by late 2023

PHOTO: The Reserve Bank of Australia is expecting house prices to surge by 30 per cent during the next three years because of record-low interest rates of just 0.1 per cent. Pictured are Sydney eastern suburbs houses

  • Reserve Bank of Australia expecting 30 per cent house price rise in three years
  • Its own modelling predicted the effects of  a one percentage point cut to rates
  •  The cash rate was cut to a record-low of 0.1 per cent in November during Covid
  •  House prices surged by more than 16 per cent in Byron Bay and Noosa in 2020 
  •  Even Sydney saw a four per cent house price rise last year despite repeated falls 

The Reserve Bank of Australia is expecting house prices to surge by 30 per cent during the next three years because of record-low interest rates.

Despite the Covid recession, national house prices rose by 3.7 per cent in 2020, with values in regional areas soaring by 7.1 per cent, CoreLogic data showed.

Beach havens like Byron Bay and Noosa did even better, with property values surging by upwards of 16 per cent in one year.

Far from discouraging home buyers, the economic crisis coincided with price records being set in 39 of Australia’s 88 statistical regions as more people could work from home.

The worst economic crisis since the 1930s Great Depression saw the RBA in November cut interest rates to a record-low of 0.1 per cent and three of Australia’s big four banks are offering standard variable rates of less than two per cent.

For that reason, the central bank is predicting a 30 per cent jump in house prices during the next three years, based on modelling showing the effects of a one percentage point cut to the cash rate.

‘Currently, much of the credit growth is coming from owner-occupiers,’ the RBA research said.

‘First-home buyer activity has increased strongly in recent months, a positive indication of access to housing for younger households.’

Between October 2019 and November 2020, the RBA cut interest rates by 0.9 percentage points, with the central bank now engaging in radical quantitative easing where it is buying government bonds to boost the economy.

In December, when interest rates were left on hold, RBA Governor Philip Lowe reiterated the cash rate would stay still for some time.

‘Given the outlook, the board is not expecting to increase the cash rate for at least three years,’ Dr Lowe said.

Australia’s unemployment rate surged from 5.1 per cent in February to a 22-year high of 7.5 per cent in July as a result of the Covid shutdowns and border closure.

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