Housing prices set to soar By Nick Gardner From: The Sunday Telegraph September 06, 2009 12:00AM
AUSTRALIA could be heading for another rampant house-price boom, fuelled by cashed-up superannuation investors exploiting generous government concessions.
While the Treasury is trying to dampen demand by winding back the First Home Owner Grant at the end of this month, a little-known rule change made before the financial crisis began is enabling thousands of super savers to use funds as a deposit on an investment property.
Finance firms say inquiries about using their super in this way are soaring, while the amount of super savings used for property investment rose by 25 per cent in 2008 to $44 billion - a record high.
Economists say it would only take a fraction of the $300 billion sitting in the country's 400,000 self-managed super funds to boost house prices.
Steve Keen, Professor of Economics at the University of NSW, says just $5 billion of new money entering the market each month would pick up the slack left by the withdrawal of the First Home Owner Grant.
Start of sidebar. Skip to end of sidebar. .End of sidebar. Return to start of sidebar. "Given that these funds can borrow up to 80 per cent of the property's value, and they currently contain more than $300 billion, an extra $5 billion a month into the property market would be no sweat,'' he said.
"The capacity for the super industry to boost property prices is enormous.''
Shane Oliver, chief economist at AMP Capital, says the new confidence in the economic recovery could ``open the floodgates'' for super investors who have been sitting on their hands during the financial crisis.
He says a rush of new investment could force the Reserve Bank to raise interest rates much faster than previously thought.
"The Reserve Bank is already worried about a house-price bubble and this will be the last thing it wants to hear,'' he said.
Property analysts Residex reported last month that Sydney prices were rising at an annualised rate of 28.9 per cent, fuelled by government grants and low interest rates and, if prices continue rising at such a rate, aggressive rate hikes are inevitable. -----------------------------------------------------------
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