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House prices are rising again, but will brakes be applied?

Firstlinks |  03 December 2019  |  Investing

The Australian housing market has steadily reaccelerated since the middle of this year. House prices across most capital cities had been falling for 21 consecutive months, but finally bottomed out in around May 2019 and are now rising again.

Just last month, house prices rose at their fastest rate in more than four years and have already regained a third of the past two years’ losses.

There are three main contributing factors to the recent turnaround:

First, the RBA has cut interest rates three times since May, lowering the cost of borrowing for households.

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Second, the coalition government’s success at the Federal election in May removed some of the perceived risks to the capital gains discount and negative gearing, locking in these favourable housing policies for investors.

Third, the Australian Prudential Regulation Authority (APRA) reduced the interest rate serviceability measure that banks are required to use when assessing home loan applications. This relaxation of lending standards led to an increase in successful applications.


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