NEWS
Macquarie Bank has dismissed analysts' predictions of plunge in house prices over the next 12 months but still expects them to soften.
According to Macquarie, a combination of rapid population growth, strong labour market conditions and sustainable debt suggests the Australian housing market is built on solid foundations.
Rising interest rates would soften the market over the next year but would not trigger a dramatic price correction.
"The most obvious starting point in addressing the sustainability of house price growth in Australia is the structural supply and demand imbalance," the report said. "Essentially, there are not enough new houses being built to accommodate a rapidly growing population."
While 150,000 houses had been built each year since 2005, the population had grown by more than 350,000 a year - this is a 50 per cent increase in the pace of population growth, but no change in the rate of new dwelling construction.
Source: The Australian
Published: 10 July 2010