Disaster looming in Aussie housing market

PHOTO: Australian property market: lenders tightening?

When the Reserve Bank joined the Federal Reserve and other central banks in slashing interest rates to the lowest levels in history in March 2020, it turned the world of asset prices and finance quite literally upside down.

All of a sudden, bad news became good news for asset prices, as it ensured further central bank and government intervention to prop them up.

The Australian housing market was no exception.

As the images of unemployment lines weaving around the block reached our screens, measures of support were put together by the RBA and the Morrison government, which prevented the worst from happening to the property market.

Just like that, bad news became good news for property prices, although it wasn’t immediately clear to the vast majority of analysts and commentators at the time.

But now, as the labour market improves and truckloads of stimulus does its job supporting the economic recovery, risks are ironically beginning to emerge.

How does employment impact house prices?

In a world where bad news was good news for the property market, too much good news for the economy could be bad news for a roaring housing market.

In recent months the Aussie labour market has consistently shocked analysts and economic commentators with the rapid pace of its recovery.

In October’s federal budget, Treasury forecasted that the unemployment rate would still be sitting at around 5.5 per cent in the 2023-2024 financial year.