Category: Market Outlook

One of the key issues for the Australian economy in 2023 has been the strength in house prices… The end point… is that house prices are set to rise by 10 per cent in 2023, not fall 20 per cent, as the demand and supply dynamics underpin prices across all capital cities and in many regional areas. From an economic perspective, this is good news.

These events have had a significant impact on global financial markets which have reaction by pricing in a higher probability – but not a certainty – that official interest rates will need to rise further to squash any re-emerging inflation pressures while at the same time, expectations for interest rate cuts have been dramatically scaled back.

The 1.2 million dwelling target would mean…. just under 20,000 private sector dwellings per month every month for five years on average… a major positive for the construction sector with an extended upswing.

Zagga’s general market overview provides insights into the Official Cash Rate, Inflation, Population & Employment, and Housing.

Strong demand from rapid population growth in concert with limited supply because of relatively soft rates on new dwelling construction are seeing house prices continuing to rise. The price increases are across all capital cities and are extending to most regional centres.

While there remains clear evidence of the economy slowing, Stephen Koukoulas, Zagga’s Economist ‘in residence’, also acknowledges the positive trends currently coming to light: “House prices are… stronger, being in the early stages of a cyclical upturn with a surge in demand for housing coming from sharply higher immigration and supply being constrained by low levels of new dwelling construction.”

House prices are rising. This has a range of important implications particularly when it comes to the cost effectiveness of new construction and the medium term outlook for the dwelling sector. If what we are seeing on house prices is the early stages of a price uplift, even of moderate proportions, the incentives for builders moves in favour of new construction.

With official interest rates nearing their peak, having been hiked 375 basis points since May 2022, the Australian economy is slowing.

Australia has lots to offer to CRED investors and Zagga has carved its niche amongst the Australian non-bank lenders and alternative asset managers.