THE rapid upward trend in housing prices is at an end, with the Reserve Bank forecasting that growth will be slower than over the previous 30 years.
The slowdown means today's young homebuyers should not expect to receive the same capital gain on the family house as their parents did and that total returns on rental properties will also fall.
The population demands on the nation's key cities are also likely to see urban dwellings become more compact, exacerbating construction delays.
Head of the Reserve Bank's Financial Stability Department Luci Ellis played down the much-touted shortage in housing supply as a significant factor in pushing up prices.
Dr Ellis has instead put the onus back on to the industry, saying that construction expenses were the largest contributor to the costs of developing a new home.
In a speech to a Citibank Property Conference in Sydney yesterday, Dr Ellis said the housing market had finally adjusted to the onset of the low inflation era that began in the 1990s.
She said household savings ratios had reached a "new normal" level of about 10 per cent of income, recovering from when falling interest rates loosened access to credit and pushed up housing prices.
Dr Ellis said the aggregate debt to income ratio had been "broadly flat" since about 2005 and the ratio of average housing prices to income had levelled off a year or so earlier.
» Read more: Property game is over – house price growth trend 'over'
