The low interest-rate environment is projected to remain the major tailwind for dwelling prices in Australia, according to an expert from CoreLogic.
Eliza Owen, head of residential research at CoreLogic, said despite the sluggish performance in some economic indicators, the low cash-rate setting has consistently supported the uptrend in housing values.
"Despite a swift recovery trend in labour-market conditions across Australia through the December quarter, wages growth remained low at 1.4% over the 2020 calendar year. These inflation and wages outcomes reinforce the need for the low cash-rate target, likely for years to come," she said.
Dwelling values in Australia have been on an upswing in recent months, striking a 1.8% growth in April. While this was down from the 32-year high of 2.8% in March, dwelling values over the month were still 10.2% higher than the lowest point reached in September.
"While the RBA may not specifically be concerned with strong acceleration in dwelling values, there has been consistent messaging that regulators are keeping a close eye on housing lending conditions, and will respond to excessive risk in this space," Owen said.
The latest lending figures would likely impact the decision of regulators, particularly the rising investor activity.
After a 20-year low, loans to investors increased for the 10th consecutive month, up by 12.7% monthly and 54.3% annually. The improving rental conditions are supporting activity in the investor segment.
"A higher level of investor participation could signal an increase in risk-taking or speculative activity, as it is owner-occupiers who tend to be quicker at paying down debt," Owen said.
Still, Owen said despite the surge in investor lending, the proportional value of investor loans remains below average at just 25.9% of mortgage demand.
"If speculative activity rises more materially, or lending standards worsen, we could see tighter credit controls implemented by APRA, which would likely dampen market activity," she said.