Property in Australia ’set for upward pressure’

Australia’s property market has avoided a major slump but must now see a rise in supply to avoid a surge in prices, one of the country’s most senior economists has said.

Head of economic analysis department at the Reserve Bank of Australia Tony Richards noted: "Over the past five years, housing prices have risen less rapidly than incomes, after a long period when the reverse was true."

However, he suggested, this may be a difficult situation to sustain, due to factors such as future interest rate rises, economic recovery and the effects of Australia’s rapid population growth.

He also noted that as unemployment falls there could be a labour shortage in the construction industry, making it hard to maintain supply levels.

Those keen to buy overseas property in Australia may be interested in purchasing as the average price could soar in such circumstances.

Last week, two economists told a Your Money table forum that prices in the country will continue rising.

AMP Capital Investors chief economist Shane Oliver and CommSec chief economist Craig James said the lack of supply would be the main inflationary factor in the market, news.com.au reported.