Affordability constraints or the prospect of an interest-rate rise in the medium term might cap the growth at about 25 per cent in three years’ time, they said – but it would still be a significant jump.
Reserve Bank of Australia research in 2019 found a permanent one percentage point cut in the cash rate would result in an increase in house prices of 30 per cent after three years.
And if that interest rate reduction were temporary, house prices would rise by 10 per cent in the same period, the modelling showed.
While neither scenario has eventuated precisely, experts say that an ultra-low interest rate environment has helped kick off the latest housing boom and is likely to sustain it for the next two and a half years.
The Reserve Bank held the cash rate at 0.1 per cent at its July board meeting, saying its central scenario was to keep it there until 2024 but revealing it would ease its other emergency support for the economy – and adding that there are other “plausible scenarios” as the economy recovers.
The author of the 2019 report and now chief economist for the Centre for Independent Studies Peter Tulip said he expected house prices to rise by 25 per cent by 2023 if interest rates and inflation remained low.
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