With the potential impact on household wealth in mind, The Reserve Bank of Australia is closely monitoring the weakening home prices in major cities such as Sydney and Melbourne.
Central bank’s Head of Economics Analysis Alex Heath said on Thursday that the country’s economy has been rosy overall, and that the bank maintained a positive outlook for investments outside the mining sector.
However, she also pointed out that the slight slowdown in housing construction was unlikely to help economic growth in the future.
Reuters reported that much of the unfinished work is in New South Wales and Victoria, where home prices have fallen significantly over the past few months. “Housing price growth has been strong until recently in Sydney and Melbourne, where population growth has been strong,” Heath said at a conference at the Urban Development Institute of Australia in Wollongong.
“Given that housing accounts for around 55% of total household assets, we are paying close attention to these developments,” she added.
Property consultant CoreLogic’s research last week revealed that home prices in Sydney decreased by 4.5% in June from 2017, a new low since the 2008 global financial crisis. Additionally, yearly price growth in Melbourne dipped to 1% after having a double-digit pace last year.
Heath pointed out that strong house demand is expected to continue, given that is directly proportional to the country’s robust population growth.
Currently, Australia’s population is increasing by 1.6% every year – more than twice the average of the developed world. It is mostly driven by immigration, particularly from people on student visas.