With house prices on the rise and lenders tightening their regulations, many Australians are resigned to the fact that they may never own their own homes. But according to AMP’s chief economist, Dr. Shane Oliver, current market forces make it inopportune to purchase a home right now.   

As a quick disclaimer, Dr. Oliver said it’s important not to generalise when it comes to measuring housing affordability. In some parts of the country, such as Perth and Darwin, prices have retreated back to where they were a decade ago. Even in cities where price growth has gone through the roof (namely Sydney, Melbourne, and Brisbane), there are “several reasons” why it’s best to hold off getting onto the property ladder.   

House prices are cyclical

The old adage, “what goes up must come down,” is relevant in this situation. “If you look at past cyclic patterns in house prices, periods of strength are often followed by periods of weakness,” observed Dr. Oliver.

“We have seen this several times over the last decade or so now — with weakness around 2004-05, again around 2008-09 and again in 2011. Prices in Sydney fell on average somewhere between 5-10 per cent. So after such a huge run up the likelihood is we would go through a period of weakness, which would then provide opportunities for buyers where they can buy at a much lower price than what is currently the case.”

Rents are becoming more affordable 

In the most expensive capital cities, part of the housing affordability issue is the high cost of rent. For many prospective first-home buyers, it’s almost impossible to save for a deposit and pay rent at the same time. According to Dr. Oliver, rents are actually beginning to plateau at a time when house price growth is so strong, making staying in a rental property the sounder financial decision right now.

According to CoreLogic’s latest “Mapping the Market” report, rental rates across the combined capital cities are falling and showing their biggest declines in more than 20 years.

Residential properties are increasing

Part of the reason why house prices are so high is because there is an undersupply in the property market. However, new supplies are set to hit the market very soon, ensuring that supply meets demand, which in turn will help ease prices.

According to the latest building approval statistics released by the Australian Bureau of Statistics (ABS), the total number of houses and apartments approved for construction surged for the ninth consecutive month this August.