Australia's housing price rises more modest than overseas: RBA

The RBA has noted that housing prices had increased significantly in recent months. 

"Growth in housing prices had been especially strong for detached housing, particularly in outer metropolitan and regional areas," according to the RBA.

"This had partly reflected strong demand from first-home buyers and owner-occupiers seeking more space."

"The momentum in housing price increases had broadened recently to include the largest capital cities and the more expensive segments of these markets, although the increase in overall housing prices in Australia during the pandemic had been more modest than in a number of other countries."

The minutes did not only single out New Zealand.

The minutes did note cross-country differences in population growth stemming from international border closures. 

"In some countries, including Canada, which had experienced high and rising rates of immigration in the years prior to the pandemic, population growth had slowed substantially."

"In New Zealand, some of the slowdown in population growth had been mitigated by the return of expatriate New Zealand citizens during the pandemic; in turn, it was likely that this had contributed to the increase in housing demand in New Zealand."

The minutes noted the decline in population growth in Australia had been particularly steep relative to other countries; in the 3 months to September, the Australian population had declined for the first time in several decades as a result of a reversal in net overseas migration. 

"However, in countries where net migration had contributed less to population growth in the years before the pandemic, including the United States, population trends had been little changed in recent quarters."

The minutes also noted that globally, asset prices had been increasing given the low levels of interest rates. 

"Housing prices, in particular, had increased strongly in a number of countries in the latter part of 2020 and early 2021."

"Growth in housing credit had increased in a number of these countries, but it generally remained slower than growth in housing prices."

It noted that in Australia growth in both housing credit and housing prices had picked up, "but to a lesser extent."

Annualised growth in housing credit had been around 4½ per cent over the 6 months to February, driven by demand from owner-occupiers. 

The minutes noted demand for new housing finance had been strong, and the high level of loan commitments indicated that housing credit growth was likely to increase in the months ahead. 

"However, there was no notable evidence of a deterioration in housing lending standards. 

"The share of loans with higher loan-to-valuation ratios had increased, but this was in part explained by the larger share of first-home buyers."

"The share of loans with high debt-to-income ratios had been relatively stable."

"Members agreed that it would be important to watch carefully for increased risk-taking by lenders and any deterioration in lending standards and larger shares of higher-risk loans."

The members noted that low interest rates had been one of the factors contributing to the increase in demand for housing, alongside other policies such as government grants. 

The latest minutes noted advertised rents had also picked up in a number of capital cities recently, although, as in other countries, housing prices had increased by more than rents.

"Rents and overall conditions in the apartment market in Melbourne, and to a lesser extent in Sydney, remained subdued as the reduction in net overseas migration was still lowering demand," it noted.