PHOTO: Property bubble
Australia’s property bubble could burst if one of the three pillars that have created the boom were to be removed.
The market has seen unprecedented growth since the initial phase of reopening after the 2020 Covid lockdowns, fuelled by the perfect storm of low interest rates, government subsidies and a local market driving demand.
According to Dr Diaswati Mardiasmo, chief economist at PRD, should these key factors change, we could see the property bubble burst.
“At the moment, the reason why we have this bubble is because we’re still sheltered from international demand,” she said.
“This is all local demand from within Australia, and it’s being incentivised by government policies in the housing market. Whether that’s First Home Buyers or single parents, regardless of demographic, the government is pushing for home ownership.”
“You’ve got that incentivisation from the government and then the other side, which is very low interest rates and home loan rates. Those three factors are what is creating the bubble and protecting the Australian property market, and pushing it up and up and up.”
“It could be a massive burst or it could be what we’re starting to see, which is a correction or slowing down with prices stabilising, but for any correction to happen, the three things need to change.”
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