Australia’s record-low interest rates and not government support were the driving force behind the massive boost in first home buying during the COVID-19 pandemic, according to economists.
“We might think the economy is slowing down and [therefore] it’s more difficult for first home buyers to purchase, but it is on those periods where first home buyer activity actually surges,” Dr Tsiaplias said. The main reasons were the increase in borrowing power for households and the fall in servicing costs because of the lower interest rates, combined with less activity from investors who are usually able to beat out first-time buyers.However, they only tended to help a small portion of early adopters who then drive up prices in the affordable end of the market – or the portion of the market covered by the policy – then locking out those who come after.
Low rates drove an asset bubble