After a choppy few months, demand surged again in July with even the struggling WA market starting to hit its stride.
In July, the index hit another new peak, and only one section of the Australian market, NSW apartments, saw a slight drop in demand. Given that the state has been seeing decades of housing undersupply, this is surprising, but it has more to do with affordability concerns impacting demand levels, rather than people not wanting to buy.
Tasmania remains the standout performer, seeing far more people looking to buy than the number of available properties. From both a buyer’s and renter’s perspective, demand is high, which may support new development in key areas. Hobart is the only capital city in Australia where we haven’t seen a building boom and demand levels suggest that now may be the time to start increasing housing supply. Given the size of the market, it may not need many projects to lead to a better balance.
The continued increases in demand would suggest that we will see more price growth, but it’s likely the continued lending rate rises will be the limiting factor. The RBA is clearly unlikely to increase rates in a hurry, but continued increased costs of wholesale funding, pressure from APRA and the new banking tax will mean that banks will pass these costs on to mortgage holders.