RBA predicts future increases in dwelling investment

The Reserve Bank of Australia’s head of economic analysis, Jonathan Kearns, recently gave a speech entitled ‘The Outlook for Dwelling Investment’ that provided some interesting insights into the future of Australia’s residential property market. In particular, he forecasted that ongoing demand for new housing will drive increasing dwelling investment over the coming years.

 

According to Mr Kearns, low vacancy rates in Australia’s rental markets are a telling indicator of the significant demand that already exists for new dwellings:

 

“Tightness in the rental market will generally be indicative of tightness in the overall property market. While the typical owner-occupier property will differ in many ways, there is significant interconnection between the markets for owner-occupier and rental properties,” he said.

 

Commenting on why these market factors have not been reflected in construction rates, Mr Kearns said that ”while the number of dwellings constructed each year hasn’t grown, the size, quality and relative cost of each dwelling has.”

 

Furthermore, Mr Kearns noted that developers’ exposure to risk has increased in recent times, off the back of increasing regulation and greater involvement with community infrastructure provision – an area that had traditionally resided with various levels of government

 

Mr Kearns concluded that dwelling investment would likely increase at a relatively moderate rate in the medium-term, supported by demands for new housing:

 

“So what is the outlook for dwelling investment? While the long-run decline in the average number of people per household seems to have tapered off at least partly for demographic reasons, the strong population growth in recent years and the relatively low rate of dwelling construction suggest that there is sufficient demand for housing in the economy that an increase in supply could easily be absorbed.

 

“Overall, it looks likely that dwelling investment will pick up at a relatively moderate rate in the medium term. How quickly and how strongly of course remain important questions for understanding the impact on the overall economy.”

 

For more information about property investment options in your area, please contact your local CENTURY 21 office.

Posted by Charles Tarbey on 30/11/2012 at 12:00 AM | Categories:

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