PHOTO: National house prices have continued to rise during the COVID-led recession.(ABC News: Alistair Kroie)

After years of dire predictions that Australia’s property bubble could burst, national house prices continue to withstand the otherwise devastating impact of the coronavirus pandemic, and once again the doomsayers have been proven wrong.

Data released this week from CoreLogic shows the national average rose 0.4 per cent in October, following five months of national declines during the COVID-19 pandemic.

Every state across Australia (except for Melbourne which suffered the impact of a second COVID lockdown) experienced gains.

But how long will the good run last?

It’s a question I asked AMP Capital chief economist Shane Oliver, who in late March at the onset of the pandemic in Australia, had warned that house prices could plummet by 20 per cent in a worst-case scenario.

In response to my question, Dr Oliver jokes that when people get their Australian citizenship, it should come with a written warranty saying, ‘Congratulations, you are now guaranteed to live in a country where house prices will continue to rise’.

He says over the years regulators and government have always stepped in and introduced measures that stopped the bubble bursting.

These range from interest rate cuts, tax incentives for property investors and other measures aimed at propping up construction.

Shane Oliver, AMP Capital chief economist. Interviewed by 7.30, May 2019
AMP Capital chief economist Shane Oliver says regulators and government have always stepped in and introduced measures that stopped the bubble bursting, but now there are limits.(ABC News)

During the early 1990s recession, the level of household debt in Australia was around 40 per cent of income, he says, whereas now it is close to 200 per cent — one of the highest levels in the world.

“Each time there’s a downturn people get worried about debt and pay some of it back, but before things go too far [into the positive], the Reserve Bank cuts rates and people start borrowing again — we go back to a new level of debt and it starts the cycle again.”

So, does Dr Oliver still think house prices will dive 20 per cent this year?