CHART OF THE DAY: Australia's Housing Recovery Will Last 3 More Years

Good news today for Australia’s home owners but not so good news for those locked out of the market by rising prices.

Mark Steinert, CEO of Stockland, Australia’s largest housing development company , told the Australian Financial Review that the current recovery in housing could last at least another three years.

The key according to Steinert:

…is not interest rates; it is confidence. Interest rates were stimulatory at the beginning of the year but markets were flat.

The economic growth that we are seeing is broadening out because the dollar is lower.

If interest rates were to back up 100 basis points, or 150 basis points, you would see some volatility but you would not affect the overall demand.

3 more years of this?

The rate of increase in housing prices over the last 12 months, particularly in Sydney which is up more than 13%, Perth (8%) and Melbourne (7%), has been very strong.

So if Steinert is right and if, as he also noted, the supply-demand imbalance has to be rectified after years of deterioration, then the Australian economy is going to do pretty well over the next few years.

Rising house prices drive confidence which drives house prices which drive confidence and both create demand for new housing, which is what Australia really needs. That in turn should go a long way toward fixing the supply-demand imbalance and providing the jobs needed as the mining investment boom ends.

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