HIA predicts soft landing for housing ‘super cycle’

HIA chief economist Tim Reardon said this “super cycle” of real estate activity across Australia would help the residential property market “run at full capacity until 2022”.

However, impending interest rate hikes could curb this cycle.

“When interest rates inevitably rise, it will reduce the borrowing power of households,” Mr Reardon explained.

“Slowing house price growth will make banks increasingly reluctant to lend for new home construction and will have a negative effect on consumer confidence.”

Nor is it a question of when a cash rate hike will be announced, Mr Reardon added, because a rate hike at any time “will lead to the same results”.

The impact of inflation has already been felt in the home building industry, Mr Reardon revealed, with rising costs for land, materials and labour.

Given that housing prices are outpacing these cost increases, its significant impact on housing demand has yet to be felt, but may soon come for compounding reasons.

Slower population growth due to border closures for two years, along with slower house price increases and tighter lending conditions, may stifle “demand for new single-family homes from 2023”, Mr. Reardon said.

He further predicted that the volume of single-detached home construction would fall from 2022 to 2023, returning to pre-COVID levels by the end of 2023.

This led Mr. Reardon to predict increasing the attractiveness of multi-unit homes, such as townhouses and apartments, as buyer prices are shut out of the single-detached home market. The expected increase in migration will lessen the impact of a rise in rates for these types of housing, he pointed out.

In order to avoid a brutal accident for the “great tourthe chief economist estimated that “if the national economy remains strong and unemployment low, the bottom of this next cycle will not be sharp, deep or sustained”.

HIA predicts soft landing for housing ‘super cycle’



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Last update: February 24, 2022

Posted: February 25, 2022