Australian house prices: Real estate market boom unsustainable, banks fear, and could

House prices across Australia continue to soar to insane levels despite lockdowns, and unlikely voices are warning it’s out of control.

At the start of the coronavirus pandemic, as the world teetered on the edge of unprecedented uncertainty, economists issued a dire prediction for Australia’s housing market.

It would experience huge losses unlike anything we’ve seen in modern history, with estimates ranging from a 10 per cent slump right up to a devastating 30 per cent collapse.

And yet, despite mass job losses, widespread lockdowns, the shuttering of the economy and a resulting recession, and the disruption of trade, those forecasts never eventuated.

In fact, median housing values across Australia have surged 15.8 per cent over the first eight months of 2021, and are 18.4 per cent up over the past year.

Prices are higher than they were before anyone knew what Covid-19 was and have grown at the fastest annual pace since 1989.

“In dollar terms, the annual increase in national dwelling values equates to approximately $103,400, or $1990 per week,” CoreLogic research director Tim Lawless said.

Apart from those trying to get on the property ladder and struggling, most other players in the market would be celebrating the historic upward movement of the market … right?

This week, an unlikely voice joined the growing chorus of concern over the continuing boom, which has continued during lockdowns in the two biggest markets of Sydney and Melbourne.

Commonwealth Bank chief executive Matt Comyn said he’s growing “increasingly concerned” by the rapid growth of prices in virtually every city, as well as across major regional areas.

Despite being the nation’s largest bank and biggest lender of loans for home purchases, meaning it’s raking in the cash, Mr Comyn told a parliamentary hearing the bank wanted to see steps taken to “take some of the heat out of the housing market”.

Prices still growing, but slowing

National housing values road again by 1.5 per cent in the month of August, with the largest market of Sydney up 1.8 per cent, CoreLogic’s index reported.

That rate of growth for the New South Wales capital is despite the city being in an extended period of lockdown, with property inspections only available by appointment and limited to one person at a time, and auctions conducted online only.

Similarly, in Melbourne, also in the midst of yet another lockdown, prices still rose by 1.2 per cent – a modest increase, but in the context of the covid landscape, impressive nonetheless.

“In the significant period of lockdown in Sydney, Melbourne, we have seen big falls in consumer and business confidence, as you would expect,” Mr Comyn said on Thursday.

“I’m not seeing much of a slowdown in terms of (mortgage) applications and funding. You can see the market is still very active.”

Elsewhere, the strongest gains in August were seen in Hobart, up 2.3 per cent, Canberra, up 2.2 per cent and Brisbane, up 2.0 per cent.

“Australian housing…

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