One of Australia’s best-regarded financial analysts says the country is facing a potentially dangerous surge in house prices with interest rates now at record lows.
As the official 0.25 percentage point cut was matched by mortgage cuts by the banks, including an out-sized 0.28 percentage point reduction by Westpac, the government claimed a win for homeowners and businesses.
But UBS analyst Jonathan Mott this morning told the Australian Financial Review the record-low mortgage rates meant the “ingredients are now in place for another bout of sustained house price inflation in Australia and Sydney in particular”.
The economy is bracing for a hit. Job advertisement falls support government forecasts for a rise in the unemployment rate above global financial crisis highs next year.
And house prices are already on the way up, including the biggest rise in three years – a 2.4 per cent surge – last quarter.
“Given Aussie housing is already expensive by most metrics we see this as undesirable and dangerous,” Mr Mott told the AFR.