Dwelling price-to-income ratio at 2002 levels: RBA
The RBA says the ratio of dwelling prices to income is back around its 2002 level, in its latest statement on monetary policy.
Weak demand has been reflected in a fall in Australian capital city dwelling prices of around 6% since their peak in early 2011 and low housing turnover.
“Notwithstanding this, it appears that in recent months dwelling prices might have been declining at a slower rate.
“With declines in dwelling prices, the ratio of dwelling prices to income is back around its 2002 level,” the central bank notes.
It notes slower growth in housing debt has been associated with weakness in the housing market.
In contrast to dwelling prices, the RBA notes various measures of rents grew by 4% to 5% over the year.
Reasonably strong rental growth, together with falling dwelling prices, has lifted rental yields to around ½ percentage point above their mid-2000s level.
The report noted rental vacancy rates have been around 2% since 2009, above the very low levels seen in 2006–08 but still low by historical standards.
The report also noted residential building activity fell over 2011 to be around the lows of some earlier cycles in dwelling investment.
The weakness in residential building activity reflects a number of factors, the RBA suggests, including declines in established dwelling prices, having made households reluctant to commit to new contracts to build.
Also, in recent years, the RBA notes lengthy planning processes and arrangements for infrastructure provision have increased the cost of new dwellings.
The reported notes a range of initiatives have been undertaken by state governments to address these issues, including reviews of planning systems, the release of infrastructure plans and caps on infrastructure charges.
Despite recent decreases in housing prices relative to income and increased rental yields, forward-looking indicators suggest that there is little prospect of an imminent recovery in housing construction.
Approvals for new dwellings have continued to trend downwards in early 2012, especially for higher-density housing.
It notes this has followed the run-up in approvals in 2010 that was concentrated in Victoria.
Approvals for detached houses are at low levels in all mainland states, notwithstanding a recent increase in Queensland that can be partly attributed to the state government’s building boost grant for new dwellings.
