Credit availability and lending liquidity have emerged as significant factors driving recent housing market volatility since 2018, according to new research from RMIT University.

An RMIT University research team led by Dr Peng Yew Wong investigated the effects of quantitative easing (QE) on the Australian housing market during the COVID-19 pandemic.

They found that the traditional key macroeconomic determinants such as GDP growth and population growth proved less significant in the latest Australian residential property market during the pandemic.

According to the study, the property market was recovering in 2019 as credit liquidity improved, only to be plunged into negative territory in early 2020 due to the pandemic.

Many expected the demand for housing to tumble during the pandemic, however the Australian Bureau of Statistics’ weighted average house price index of the country’s capital cities jumped 24% between 2019 and the June 2021 quarter.

The team found that the same house price accelerations were observed in the Sydney and Melbourne housing markets following a slew of fiscal and monetary expansionary measures implemented by state and federal governments and the Reserve Bank of Australia.

The study said the diminishing housing financing liquidity contributed by the Royal Banking Commission enquiry in 2018 and the QE measures taken to improve financial liquidity in Australia were key financial market events for Australia’s property market.

Earlier research from the team found that residential property prices for Australian cities experienced their first major downturn since the global financial crisis at the end of 2017 due to the decline in housing credit.

The decline in housing credit was the result of negative pressure on the Australian housing market following the 2018 Royal Banking Commission.

The research team was made up of Peng Yew Wong, Kwabena Mintah, Woon-Weng Wong and Kingsley Tetteh Baako.

The research was supported by the Australian Property Research Education Fund (APREF) and RMIT University.