"Boom boom boom boom!"
The Australian property market should adopt this as its official anthem. The property craze in this Land Down Under is best portrayed by an article in the Daily Telegraph telling the story about "a mouldy 1970s house with a leaky roof and rooms cordoned off with danger tape" selling for $1.68 million at a frantic auction attended by 16 bidders, with the buyers reportedly planning to spend another $300,000 to restore the three-bedroom house in Frenchs Forest, New South Wales.
Every Australian wants to get a piece of the action. Homebuyers want to get in before house prices get even higher and property investors are revving up purchases in anticipation of booms to come.
With interest rates at record lows and the Reserve Bank of Australia (RBA) pledging that they will remain at current levels until 2024, those who can afford to borrow are borrowing ... to the hilt before rising house prices priced them out of the market.
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CoreLogic's home value index shows that the "five city capital aggregate" index increased by another 2.3% in the month of May (from April's 1.8%) to be 9.1% higher from a year earlier.
Not only that: "CoreLogic's research director Tim Lawless observes that growth conditions remained broad based both geographically and across the housing types and valuation segments".
Home values for "all dwellings" in Australia increased in all of the country's six states and two territories in May, ranging from a 3.2% month-over-month surge in Hobart to a 1.1% appreciation in Perth.
The Australian Bureau of Statistics' (ABS) 'Lending Indicators' report indicates that the country's property will get even more hot, hot, hot.
Total new housing loan commitments surged to a record high A$31.1 billion in April - up 3.7% over the month and 68.2% from the same month last year, with both owner-occupiers and investors ramping up purchases.
Owner-occupied housing loan commitments increased by 4.3% to a record high $31.1 billion in April - up 70.1% from a year ago - while loan commitments from investors went up by 3.7% month-on-month and surged by 63.0% from April 2020.
So far, the RBA has only acknowledged the rise and rise in house prices and assured that it is monitoring lending standards.
"Housing markets have strengthened further, with prices rising in all major markets. Housing credit growth has picked up, with strong demand from owner-occupiers, especially first-home buyers. There has also been increased borrowing by investors. Given the environment of rising housing prices and low interest rates, the Bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained," it said.
This is a green signal for continued appreciation in house prices.
This will be partially mitigated by the 11.4% drop in loan commitments for new dwellings in the month of April (following a 14.8% decline in the previous month) because "the HomeBuilder grant was reduced from $25,000 to $15,000 effective from 1 January 2021 and was closed to new applications from 14 April 2021".
But as the ABS clarified, "...the value of construction commitments remained at a high level."
The balance of supply and demand - plus the RBA's forward-guidance for another three years of low interest rates and speculation for further gains in house prices - suggest home is where the money is.
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