While prices are a product of supply and demand, it's worth understanding the factors that sit beneath both sides of the equation. In other words, what drives supply and what drives demand?
Higher household incomes, thanks largely to two-income couples, have seen Australians seek better quality housing, invest more in property and bid-up pricing. It has since become something of a vicious cycle, with property prices putting extra pressure on households to earn more to keep up with mortgage demands.
As our population clicks over 25 million, migration continues to be strong in Australia, with many new arrivals settling in major cities. This has led some experts to recommend curbing migration to manage growth. Even without migration, however, our housing stock has struggled to keep up with demand in some cities, especially because we have long made a practice of living around our continent's edges. Others believe we need migration to supply the trades and workers to build the houses we need.
Our households have also shifted from a typical nuclear family (mum, dad and 2.2 children) to more single households or couples with no kids, which has changed what we want in a home.
Low inflation has helped keep interest rates in check for a long time. While low interest rates have been welcomed by borrowers, they have also given households more disposable income with which to bid up prices. So, what we gained on the ferris wheel, we may have lost on the affordability merry-go-round. There's speculation many borrowers may be caught out financially when interest rates inevitably head north, so make sure you have a buffer to manage any increases.
Investor lending has also tightened, with higher interest rates for investment loans and a more recent crackdown on interest-only loans having the desired cooling effect in heated markets, such as Sydney.
Talk to us to check your loan is still right for your situation. We have access to multiple loans across a range of lenders, giving you more options to save on interest and pay your mortgage off sooner.
In a recent Parliamentary Inquiry into housing affordability, one witness said "houses are being valued as speculative assets" more than they are homes.
While Australians have long viewed bricks and mortar as a sound investment, financial speculation could be fuelling demand more than our desire for a roof over our head. Investors now account for about a third of new home loans, which is why the banking regulator stepped in with tighter lending requirements for investors.