Australian home buyers have been told a narrow opportunity to enter the property market could close shortly after Christmas, as prices continue to fall following five interest rate rises and high inflation.
Tim Reardon, chief economist at the Housing Industry Association, said first-time buyers and people looking to move home should consider acting before the market begins to recover.
“So there is a narrow window of opportunity here for first home buyers and those looking to get into the market,” Mr Reardon told The Issue podcast.
“I would suggest for anybody looking for a new home, they have a window that closes sometime shortly after Christmas this year.”
Property prices tipped to rebound
National property prices have fallen 6.7 per cent since reaching a peak in March, according to Cotality data. The Commonwealth Bank expects the decline could ultimately reach 14 per cent.
Mr Reardon said the housing market was likely to rebound quickly because Australia already had a shortage of homes relative to its population, while unemployment remained low by historical standards.
He predicted Perth and Brisbane would recover fastest. Sydney, which is more sensitive to interest rates, was expected to endure a longer downturn.
Mr Reardon also disagreed with economists at Australia’s big four banks who believe the Reserve Bank of Australia has finished raising interest rates.
The official cash rate stands at 4.85 per cent, its highest level in 18 years since the global financial crisis. “We’re likely to see one early next year,” Mr Reardon said.
He said inflation had proved difficult to reduce, citing pressure from overseas, wage increases secured through enterprise bargaining agreements and the rise in the minimum wage.
Building sector faces another boom-and-bust cycle
Housing construction is expected to slow in 2027 before recovering in 2028, according to Mr Reardon. He attributed the outlook to higher interest rates, limits on foreign investment in new housing and the loss of property investors following federal changes to negative gearing and capital gains tax.
Mr Reardon called for lower government spending, a higher cap for foreign investors, accelerated depreciation for property investors and stamp duty reform by state and territory governments.
“So from a building industry perspective, it looks like we’re on that boom-bust cycle again,” he said. “I suspect we have some much greater reforms that are needed.”
The Albanese Government said it was working with the states to increase the number of homes approved for construction.
Assistant Minister for Productivity Andrew Leigh said 249,000 homes were currently being built in Australia, describing it as the highest number in the country’s history.
“The Commonwealth Government is playing an unprecedented role in investing in housing,” Mr Leigh said.
