Significant house price swings unlikely: HIA

The Australian housing market has entered a period of subdued stability with little prospect of "large price swings" a new report by the Housing Industry Association (HIA) argues.

The HIA bases this assertion on the ratio of mortgage repayments to earnings, which it views as having strong correlations with house price growth.

"The ratio bottomed out during the late 1990s, with brisk growth in house prices following," says the HIA in the report.

Now, it says the ratio is slightly above its long term average.

"This suggests that the relationship between earnings, interest rates and house prices is balanced and consistent with stability in the market. Accordingly, any large price swings are probably unlikely in the near future.

The HIA says its analysis indicates that the Australian housing market is "relatively weak by historical standards in terms of transaction volumes and anaemic price growth over recent months".

"This state of affairs underlines one of the key features of housing markets generally, whereby low levels of transaction and turnover tend to accompany periods of subdued prices.

"Consequently, the return of sustainable price growth to the market would add welcome fuel to activity in the residential construction sector," it says.