Economists are worried about rocketing Australian house prices, what should ASX investors do?
What’s Going On With Australian House Prices?
Tomorrow is the official release date of the CoreLogic house price numbers for Australia nationally and capital & regional cities.
But economists are worried that another house price boom could be about to occur according to the quarterly survey by the Australian Financial Review.
The RBA’s interest rate cuts, the Coalition’s election win and easier lending buffer changes by APRA have all contributed to the outlook for house prices look a lot better, perhaps too good.
The AFR quoted Australia and New Zealand Banking Group (ASX: ANZ) leading economist David Plank, “The turnaround in the housing sector has been sharper than we forecast just a few months ago. Auction clearance rates, prices and finance have all beaten our expectations.”
For everyone saving up for their own home worrying about house prices getting out of reach, Mr Plank thinks that regulators may do something if the housing market gets a bit too bubbly:
“We expect that the regulators will need to step in and re-introduce some sort of macro-prudential measures to limit the growth in housing debt.”
What Could Be The Flow-On Effects?
The RBA is less likely to cut rates further if house prices continue to go higher by around 1% a month. It could erase the house price falls in just one year from now at this rate.
The AFR reported that CoreLogic is likely to show that over the past four months house prices in Sydney have risen by 3.2% and Melbourne house prices have gone up by 3.4%.
But a resurgent housing market could see debt to income levels go even higher than they already are unless banks like National Australia Bank Ltd (ASX: NAB) stick to their debt to income limits.
Construction is unlikely to suddenly recover – construction has a long lead time. The number of approvals are lower, so it may be at least a year or two before things pick up again.
It’s these uncertain conditions that are causing me to focus on shares with solid yields, at good values, have a positive exposure to lower interest rates and have long term growth potential such as Rural Funds Group (ASX: RFF), Vitalharvest Freehold Trust (ASX: VTH), BetaShares Australia 200 ETF (ASX: A200) and the reliable shares in the free report below.
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Disclosure: Jaz owns shares of Rural Funds and Vitalharvest at the time of writing, but this could change at any time.
