Vendors aren’t the only winners during housing booms

Vendors aren’t the only winners during housing booms

housing boom
18 June 2015 by Staff Reporter 0 comments

Buyers who complain about rising property prices may actually be gaining a net benefit from the boost they provide the wider economy.

Rising prices have a largely positive effect on the construction, retail and motor vehicle industries, at least in the short term, according to a new report from IbisWorld.

The research group said higher prices benefit the construction industry by providing an incentive for developers to build new homes.

“This has contributed to forecast growth in the multi-unit apartment and townhouse construction industry at an annualised 9.2 per cent over the five years through 2014-15,” according to IbisWorld.

“As demand for dwelling construction increases, firms in these industries also take on more workers.”

IbisWorld said rising prices often generated increased retail sales because of the ‘wealth effect’.

The report also said that rising household wealth tends to boost consumer sentiment and induce spending – although it added this isn’t happening in Australia.

“This could be partly due to pressure felt by new home buyers to save more of their income for a larger deposit,” it said.

However, the motor vehicle industry has definitely benefited from rising housing prices, according to IbisWorld.

“As residential property values have risen, many owner-occupiers have decided to refinance their mortgages to access some of the equity built up in their homes, while also taking advantage of lower interest rates.

“Some of these consumers have then taken this opportunity to purchase a new vehicle with their freshly released equity.”

[Related: Sydney homes in on million-dollar city]

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