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PR Newswire
21-06-2014, 10:26 PM
Interest rates ease fears of housing market crash
PUBLISHED: 21 JUN 2014 02:38:00 | UPDATED: 21 JUN 2014 04:18:26
REBECCA THISTLETON
Fears of a housing price bubble have given way to modest expectations about future price rises.
Economists and property commentators have reduced growth forecasts of between 6 and 10 per cent to between 5 per cent and 8 per cent for this year.
Property values are unlikely to crash as demand growth is expected to continue, driven by low interest rates and population growth, experts say.
“The property market has lost momentum of its own accord, without the RBA having to step in with an interest rate rise,” AMP Capital chief economist Shane Oliver said.
RP Data recorded price falls in May after consistent rises for more than a year. Sydney prices dropped 1.1 per cent, Melbourne prices 3.6 per cent, Brisbane 1.7 per cent and Perth 0.8 per cent.
Growth has moderated in Sydney, the country’s hottest market, where prices jumped 15 per cent last year.
McGrath Estate Agents chief executive John McGrath said the figures were not surprising but had not shown up in individual home sales. He reduced his prediction of 10 per cent house prices rises to 5 per cent to 8 per cent.
Auction clearance rates have weakened from 80 per cent-plus in Sydney and Melbourne last year to high 60s and low 70s. Houses in high-demand pockets, particularly in affordable western Sydney, are selling within a fortnight of listing as many sellers accept offers made before planned auctions.
But buyers are eager and competitive. Transaction volumes are higher than average. Bureau of Statistics housing finance figures for owner-occupying and investment were at record highs in May.
RP Data research director Tim Lawless said the market was slowing but demand exceeded supply. “I don’t think prices have peaked, but it is likely the market has moved through the peak of the growth cycle,” he said.
“Low rental yields are likely to act as a disincentive to investors, particularly in Melbourne and Sydney where yields are the lowest and capital gains have been the highest.”
Stockland chief executive Mark Steinert said Sydney’s property was primed for a “golden decade” of stable growth around 3 per cent to 4 per cent a year, largely due to undersupply.
BIS Shrapnel senior manager Angie Zigomanis said apartment approvals had spiked and new housing starts would rise 31 per cent in 2014-15.
While an oversupply would weaken prices in Melbourne, it would take longer for demand to be met in Brisbane and Sydney, he said.
He expects the Reserve Bank to increase interest rates towards the end of 2015 which would begin to worsen affordability in 2016.
“By June 2017, only the Brisbane and Sydney markets are expected to have experienced any growth in house prices in real terms over the previous three years, with all remaining capital cities expected to have recorded real price declines,” he said.
RP Data’s Tim Lawless said markets where the growth cycle lagged behind Sydney and Melbourne were better placed for growth, namely Brisbane where prices are 50 per cent lower and yields higher.
PUBLISHED: 21 JUN 2014 02:38:00 | UPDATED: 21 JUN 2014 04:18:26
REBECCA THISTLETON
Fears of a housing price bubble have given way to modest expectations about future price rises.
Economists and property commentators have reduced growth forecasts of between 6 and 10 per cent to between 5 per cent and 8 per cent for this year.
Property values are unlikely to crash as demand growth is expected to continue, driven by low interest rates and population growth, experts say.
“The property market has lost momentum of its own accord, without the RBA having to step in with an interest rate rise,” AMP Capital chief economist Shane Oliver said.
RP Data recorded price falls in May after consistent rises for more than a year. Sydney prices dropped 1.1 per cent, Melbourne prices 3.6 per cent, Brisbane 1.7 per cent and Perth 0.8 per cent.
Growth has moderated in Sydney, the country’s hottest market, where prices jumped 15 per cent last year.
McGrath Estate Agents chief executive John McGrath said the figures were not surprising but had not shown up in individual home sales. He reduced his prediction of 10 per cent house prices rises to 5 per cent to 8 per cent.
Auction clearance rates have weakened from 80 per cent-plus in Sydney and Melbourne last year to high 60s and low 70s. Houses in high-demand pockets, particularly in affordable western Sydney, are selling within a fortnight of listing as many sellers accept offers made before planned auctions.
But buyers are eager and competitive. Transaction volumes are higher than average. Bureau of Statistics housing finance figures for owner-occupying and investment were at record highs in May.
RP Data research director Tim Lawless said the market was slowing but demand exceeded supply. “I don’t think prices have peaked, but it is likely the market has moved through the peak of the growth cycle,” he said.
“Low rental yields are likely to act as a disincentive to investors, particularly in Melbourne and Sydney where yields are the lowest and capital gains have been the highest.”
Stockland chief executive Mark Steinert said Sydney’s property was primed for a “golden decade” of stable growth around 3 per cent to 4 per cent a year, largely due to undersupply.
BIS Shrapnel senior manager Angie Zigomanis said apartment approvals had spiked and new housing starts would rise 31 per cent in 2014-15.
While an oversupply would weaken prices in Melbourne, it would take longer for demand to be met in Brisbane and Sydney, he said.
He expects the Reserve Bank to increase interest rates towards the end of 2015 which would begin to worsen affordability in 2016.
“By June 2017, only the Brisbane and Sydney markets are expected to have experienced any growth in house prices in real terms over the previous three years, with all remaining capital cities expected to have recorded real price declines,” he said.
RP Data’s Tim Lawless said markets where the growth cycle lagged behind Sydney and Melbourne were better placed for growth, namely Brisbane where prices are 50 per cent lower and yields higher.