Price Weakness Unlikely To Last

While demand for property has softened in recent weeks, new analysis from Deloitte predicts any fall in home prices will be temporary.

It says Australia is still not approving or building nearly enough homes for its population, with many approved projects yet to begin construction, which means ongoing demand will stop any long-term price declines.

Deloitte Access Economics Partner Stephen Smith and economist Dan Kelly say the combined effect of tighter monetary policy and the reaction of investors to the tax changes has been a softening in the housing market.

But they say that the “deeper forces” that have driven Australian home prices higher remain firmly in place, which means that until supply catches up, softer prices are likely to be temporary.

“While housing price growth has softened, supply constraints are likely to keep upward pressure on prices over the medium term,” the analysis says.

“Improved affordability remains a long way off, and the structural challenge remains supply”.

It says Australia remains well short of its housing targets and until the supply side catches up there will only be short-term limited affordability relief for buyers.