How rising rents flipped the housing market and wrongfooted the RBA
Australia has faced years of compounding economic shocks, but this year it was house prices that surprised Michele Bullock the most.
The biggest surprise to Michele Bullock over the past year hasn’t been the resiliency in consumer spending after 4 percentage points of interest rate increases, the (so far) missing mortgage cliff or even the relatively low levels of insolvencies despite warnings businesses are under intensifying pressure.
What our new Reserve Bank governor was most taken aback by in 2023, was the house price surge. It turns out she was just as surprised as the rest of us.
“Someone asked me earlier what surprised me [about the economy recently]. Actually, the housing market has surprised me a bit,” Bullock said, when asked specifically about her thoughts on the latest property price boom at the Australian Financial Security Authority’s annual summit on Wednesday morning.
“When COVID first hit, housing prices actually declined. And then after a few months they shot up about 25%. They really rose very sharply … this happened all the way round the world,” she said. “Then when interest rates started to rise, housing prices started to decline. And we thought that they would continue to decline. Actually they bottomed sooner than we thought.”
