Global giant buoyed by Aussie property prices
An organisation representing 189 countries has analysed the Australian market, finding that softening prices are a necessary and welcome move for the broader Australian economy.
The International Monetary Fund (IMF) has released an analysis of the Australian economy, viewing it as having strong growth, while the housing market downturn is within acceptable limits and is in fact “welcome” in order to address housing affordability.
“In the absence of a sharp rise in unemployment, interest rates, or housing inventories, an orderly correction in housing prices will help contain macrofinancial vulnerabilities,” the analysis noted.
“Pressures on housing affordability, which is critical for growth to remain inclusive, will be relieved in the process. “
The analysis also said housing supply reforms were critical to improving housing affordability, so they should be delayed because of the correction.
“Planning, zoning, and other reforms affect supply and prices only with long lags, and underlying demand for housing is expected to remain robust,” the IMF analysis read.
“Progress has been made through better integration of policies across government levels through ‘city deals,’ including for western Sydney and its new airport, and for Darwin”.
According to the analysis, more states should be consolidating planning and zoning regulation, together with broader tax reforms to address housing and land use.
“Such reforms would strengthen the effectiveness of supply-side measures and reduce structural incentives for leveraged investment by households, including in residential real estate,” the analysis stated.
Along with the current market downturn, strong demand, population growth, a lack of significant oversupply, other strong growth drivers and a solid banking sector indicate to the IMF that Australia’s property market, and overall economy, is growing strong.
Aside from the property market, growth in Australia’s economy is being driven by business investment and private consumption, and a recent trade rebound is holding steady, which the IMF state has resulted in labor market conditions seeing further improvement.
This growth is expected to continue as well through the near term, balancing out the softening in property investment and then moderate in the medium term.
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