Here Is Why You Should Not Worry That House Prices In Australia Are Rising Too Fast

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Supply and demand are what sets the prices in any market.

Too much supply and prices go down, too little supply and they tend to move upward. In both cases this happens until the market finds an equilibrium at which prices and the supply demand balance settles down.

So I was shocked when I looked at the latest RP Data Property Market Indicator Summary, by how unbalanced the supply and demand for housing looks at the moment and why prices might be rising even if there is no attendant increase in demand for home loans, as we saw in this morning’s Housing Finance data.

Just look at the table from RP Data’s release this afternoon.

Clearly there has been a response with new listings coming to market in Sydney and Melbourne against 12 months ago. But the “stock” of available houses for sale is down 25.7% in Sydney compared to 12 months ago, down 11.2% in Melbourne, 15.6% in Brisbane, while stock is up 8.6% in Perth.

That pretty much sums up the different performance in those markets when it comes to house prices.

The more I study this housing boom or bubble, the more it seems that the rise in prices is a reaction to improved sentiment from buyers, who have been waiting in the wings and who have cash to burn.

It’s not first home owners and its not increased leverage.

This is a pulse in buying and it looks like when the demand is sated, prices might just start moving sideways again.

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