First, much as the 31% jump in average house prices this past year is ridiculous from an affordability point of view, there are solid reasons explaining the rise. Topmost of these is the cutting of both mortgage and bank deposit rates to record lows in 2019 and again in March as we entered lockdown. There was also the removal of Loan to Value Ratio restrictions (LVRs), anticipation of a flood of expats coming home, diversion of the $10bn we’ve been unable to spend on overseas experiences, rising construction costs, FOMO (fear of missing out), and a soaring jobs market.
Second, both the Reserve Bank and government are trying to cool the housing market. Are they succeeding? Both Treasury and the RB in May predicted house prices would rise only 1% in the year to June 2022. In the month of July alone they jumped 2.4%.