While it is reasonable to think that the tighter lending rules as a result of the Financial Services Royal Commission's investigation would likely to reduce demand for homes, some experts do not think that prices will be pressed down.
Curtin University economics professor Rachel Ong told Domain Group said the reduction in demand for properties is unlikely to translate into significant cuts in property prices, adding that property prices in Australia have remained stubbornly high since the early 2000s.
However, Ong did note a deeper structural problem that has a more direct impact on property prices Policies that encourage over-investment in properties.
"These policy settings include negative gearing and capital gains tax discounts, the First Home Owners Grant, as well as decades of financial deregulation and historically low-interest rates," Ong explained.
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In Ong's view, the investigation of the royal commission would probably not lead to any sudden hikes in interest rates or significant changes in policy settings -- things that have been driving competition for property in the markets.
University of Tasmania economics and finance lecturer Maria Yanotti shared Ong's sentiments, saying that the low-interest rate environment would not be enough to sway potential buyers away from the market.
"Real drivers of property prices are land availability, construction costs, population growth, and to a lesser extent finance access and cost," she told Domain Group.
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