See the world through the eyes of an economist: Property, borrowing capacity and rents.
Corelogic released their market update for October last week, so let’s keep our focus on the property market this week.
First up, prices were up a solid 0.9% in October, with both houses and units now performing strongly.
That’s now the seventh monthly increase in a row, and the market has clear momentum.
The puzzle here though is that these gains have come despite 400 basis point rate hike barrage from the RBA, which has reduced borrowing capacity substantially.
That’s opened up an unusual gap between prices and borrowing capacity:
What explains the gap? Well, a good part of it is the explosion in rents in recent times, which has meant that the same property is simply worth more because the returns are greater.
And that’s how the world looks through the eyes of an economist this week.
DB.