Price hikes in real estate within the Illawarra region are starting to approach record levels again, a leading economist has suggested.
This is positive news for owners, but not so good for new home buyers and house price affordability.
Alex Frino, Professor of Economics at the University of Wollongong told the Mercury that after 15 months of consecutive price falls up until July this year, Illawarra real estate prices have begun to grow strongly.
Prof Frino said that according to data provided by CoreLogic, which provides data to the Reserve Bank of Australia for the conduct of monetary policy, Illawarra real estate prices have increased for the fourth consecutive month.
Prof Frino said this suggested the drought in house price increases is well and truly over.
"They are not just growing, however, but building up a head of steam," he said earlier this week.
"In the past four months, Illawarra real estate prices have built up momentum, growing from a rate of 0.5 per cent in August to a staggering 1.7 per cent increase in November.
"Sounds small? Not at all.
"A 1.7 per cent increase in a single month is equivalent to almost 20 per cent over one year - find me the investment that delivers that."
Prof Frino said at this rate, the 12.6 per cent in price falls over the prior 15 months could be completely recovered well before June of next year.
Prof Frino said it was also worth noting that a 1.7 per cent increase in Illawarra real estate prices is the fourth largest price increase in any single month over the past 15 years.
"Price hikes in real estate in the region are starting to approach record levels again," he said.
"This is great news for owners, but devastating news for new home buyers and house price affordability.
"Despite the fact that the economy is weakening, real estate prices are growing."
Prof Frino said there was no doubt the historically low interest rates are contributing to the recovery.
However, he said low interest rates create an environment that's conducive to real estate price growth, but they are not the explanation for the recent resurgence in prices.
"After all, during the 15 months when prices came crashing down across the nation, the Reserve Bank held interest rates at historical low rates, and actually cut them," Prof Frino said.
"The real reason for the pattern that we saw lies in various policy prescriptions around lending issued by the Australian Prudential Regulation Authority.
"In the middle of 2017, APRA placed some restrictions on bank lending for real estate investment purposes.
"The effect was that within a few months prices started crashing around the country, including in the Illawarra."
Prof Frino said these rules were relaxed in the middle of this year, and almost immediately, house prices started increasing.
"The outlook for real estate prices in the region is very buoyant," he said.
"That's assuming government or other regulatory policy doesn't intervene."