How economic factors are affecting house prices

Queensland and Australia are going through unprecedented economic times with rising interest rates and inflation being coupled with 50-year-low unemployment.

At the recent REIQ Property Insider Lunch, Market Economics Managing Director Stephen Koukoulas outlined what the economic factors might mean for the housing market. Here's some of what he had to say:

Economic snapshot

Employment is at a 50-year low of below four percent and the economy is still quite strong.

While consumer sentiment has fallen, households are still spending strongly.

Koukoulas says the supply chain pressures that contributed to higher prices for goods and services - pushing up inflation - are easing.

This could lead to inflation peaking very soon.

Household wealth

"Consumers are also cashed up, have a job, are getting a pay rise," he says. "Expect growth in consumer demand to remain solid."

Rents

Brisbane vacancy rates were at 0.9 percent for houses and 0.8 percent for units.

Koukoulas says while new dwelling building approvals are remaining resilient, the time to completion is rising.

"A shortage of materials is extreme and holding back the supply of new dwellings coming onto the market (thus putting pressure on housing supply)," he says.

Wages are due to rise

He says skills shortages persist but with international borders reopening, the government appears to be targeting a moderate level of skilled migration.

"Despite all of the talk of interest rates and tax policy driving house prices in Australia, it's population that drives house prices in the long run," Koukoulas says

"Strong population growth means strong house price growth."

The outlook

He believes a lower peak for interest rates and strong population growth will make any weaknesses in the housing market shallow and short-lived.

"A strong labour market is good for consumer spending - offsetting the effect of rate hikes at least partly."

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