The Reserve Bank has warned that difficulties in building new homes threaten to drive Australian house prices higher.
RBA assistant governor Phillip Lowe said if the nation’s population growth remained strong, more of the economy would need to be devoted towards housing, presenting challenges both to labour markets and governments.
“If this does not happen, further adjustment in housing prices and rents is likely to occur to balance supply and demand,” he said.
Australian home prices surged 13.6 per cent last year, as a strong economy and robust population growth spurred buyers to push prices higher on limited availability. At the same time bottlenecks in the new home construction have curtailed supply, adding to price pressures.
“With population growth above average, and growth in the housing stock below average, it is not surprising that there has been upward pressure on housing costs as part of the process of balancing supply and demand, with the higher housing costs leading to people economising on housing services,” said Mr Lowe.