Australia’s housing market set for strong price gains

A mix of low borrowing costs and a V-shaped rebound in the labour market is set to spark a two-year rally in national dwelling prices, according to CBA’s Head of Australian Economics Gareth Aird.

Residential property prices are rising fast in all capital cities and the pace of sales has picked up compared to last year. A significant increase in bank lending over the past four to five months – initially driven by owner-occupiers and more recently by increased lending to investors – is contributing to this trend, according to Mr Aird’s research.

“New lending, or just lending in general, is a really key guide to what’s likely to happen with prices,” Mr Aird told CBA Senior Economist Belinda Allen on the CommBank Economic & Markets Update podcast.

“The money that people borrow ends up going into the housing market, and that then pushes up prices,” he said.

Mr Aird forecasts that residential property prices will climb around 14 per cent over the next two years.