MACQUARIE Bank has dismissed analysts' predictions of a plunge in house prices over the next 12 months but still expects them to soften. According to Macquarie, a combination of rapid population growth, strong labour market conditions and sustainable debt suggests the Australian housing market is built on solid foundations.
Macquarie's residential market prognosis, contained in its September quarter general economic outlook, said rising interest rates would soften the market over the next year but would not trigger a dramatic price correction.
It said there were several reasons to believe the outlook for house prices was not as dire as many analysts predicted.
"The most obvious starting point in addressing the sustainability of house price growth in Australia is the structural supply and demand imbalance," the report said. "Essentially, there are not enough new houses being built to accommodate a rapidly growing population."
Start of sidebar. Skip to end of sidebar. .End of sidebar. Return to start of sidebar. It said while 150,000 houses had been built each year since 2005, the population had grown by more than 350,000 a year.
"This is a 50 per cent increase in the pace of population growth, but no change in the rate of new dwelling construction." Despite home shortage being a key factor in driving up house prices in recent years, price spirals had been kept in check by worsening affordability and rising debt levels.
However, very low mortgage arrears rates implied Australian households had coped well with current debt levels, Macquarie said.
