Forecasting a drop in housing pricing a wasted exercise: REIA
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May 21, 2020
Forecasting a drop in housing pricing a wasted exercise: REIA
The REIA said doomsday housing price forecasts is highly questionable when you look at history.
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REIAREIA president, Adrian Kelly
Forecasts saying that house prices will drop up to 30 per cent, are highly questionable, according to Real Estate Institute of Australia president Adrian Kelly.
“We are in unprecedented times and anyone that suggests they can forecast with any acceptable degree of probability is being highly fanciful,” said Mr Kelly.
“We can only look at what is happening in the market place at the moment as well as in previous times of high unemployment to provide pointers to likely outcomes.
“Currently we have a situation where listings are decreasing yet the enquiry level from prospective buyers is increasing.
"It is simple economics that when supply decreases and demand remains that prices edge upwards, they certainly don’t drop.”
Mr Kelly said recent forecasts suggest that the supply of new housing will be severely constrained over the coming year.
"The Housing Industry Association is expecting building of new dwellings to fall by almost 50 per cent over the rest of 2020 and into 2021," said Mr Kelly.
"This does not suggest a scenario of supply exceeding demand – a prerequisite for falling prices.
“Whilst it is expected that higher levels of unemployment will provide a constraint on house prices the anticipated levels of around 10 per cent have been experienced before and we should look at what happened to housing prices then.”
Graphs 1 and 2 show median housing prices, interest rates and unemployment rates for the period from 1980 for News South Wales and Victoria – Australia’s two largest housing markets.
“History shows us that in the early 1990s we had a sustained period of unemployment above 10% yet median house prices remained stable," said Mr Kelly.
“It needs also to be remembered that in ‘the recession we had to have’ interest rates for housing loans were around double what they currently are.
“I do not believe that this points to a catastrophic outlook for house prices,” concluded Mr Kelly.
Source: ABS, RBA and REIA
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