Housing market: House prices could go up

PHOTO: House prices

Everything is pointing towards house prices dropping because of the global pandemic. But that may not actually be the case.

There’s a huge question Australians want answered: What will happen next with house prices?

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The majority view is prices will dive. Australia’s biggest bank forecasts house prices to fall 10 per cent in the next six months. The fall, say analysts from the Commonwealth Bank, will be “driven by weak sentiment, rising unemployment, social distancing measures and a

sharp slowdown in net overseas migration.”

For a lot of Australians the end of endlessly rising house prices would be very welcome. House prices are crazy high, especially in the capital cities. I include myself here. I don’t own a home, although I’d like to.

But in this tumultuous time, there’s a risk. A risk house prices don’t do what the economic forecasters expect. The risk is they keep going up. It wouldn’t be the first time Aussie house prices have defied expectations – and common sense – to get even more expensive.

WEALTH EFFECT

Two things have me wondering about rising house prices. First is the wealth effect. Plenty of Australians are, paradoxically, finding themselves better off in this crisis. The wealthy are those who usually spend most on restaurants, cafes and holidays. Now all that money is stuck in their pockets, building up and looking for an exit.