Earlier this month, the RBA lowered the cash rate to 0.75%, the lowest in Australian history. Now, concern is growing it will do nothing except increase house prices. Here’s why the race is on for Aussie house hunters to ‘cash in their chips’ before house prices soar.
House prices rising
Australian house prices are rising. According to data from Corelogic, national dwelling values have increased by 0.9% in the first month of Spring. This was the biggest monthly gain since March 2017.
Sydney and Melbourne house markets are leading the price rise with both markets increasing by 1.7% over September. Mr Tim Lawless, the head of research at Corelogic, said this can be attributed to the low unemployment rates in these cities and strong population growth. He also said investor participation could be a factor.
Canberra (+1.0%) and Brisbane (+0.1%) markets also saw prices rise, while the other capitals saw prices either remain the same or continue to fall. Adelaide prices held while Darwin (–0.2%), Hobart (–0.4%), and Perth (–0.8%) saw drops.
Despite the fall, Mr Lawless says markets outside of the Sydney and Melbourne growth are still benefiting.
“Although [they] aren’t showing the same recovery trend, most areas have either seen a reduction in the rate of decline or are seeing a modest trajectory of growth as low mortgage rates and a slight loosening in credit policy support buyer demand,” he said.
How long until prices return to peak?
Mr Lawless said that although house prices are increasing, there is still time for house hunters to buy before peak prices return.
“Although housing values are now consistently tracking higher, at least at a macro–level, the national index remains 6.8% below the October 2017 peak, indicating that buyers still have some time to take advantage of improved housing affordability before values return to record highs” Lawless said.
Domain economist, Trent Wiltshire agrees there is still time to buy, but the window of opportunity is closing.
He added that the market has rebounded more than they forecast back in June, and prices might return to peak by the end of next year.
“Based on recent indicators, it looks like price growth over the next 12 months could be above 5 per cent, maybe even around 10 per cent” he said.
With these predictions, home buyers have just over 12–months to take advantage of the current low prices.
What do economists say?
Economists are divided in their opinions on the trend. Some hope that the price increase is not as sharp as predicted.
Independent economist, Saul Eslake, said Australian properties are some of the most expensive in the world and any delay in the rising prices would be ideal.
Conversely, the Deloitte Business Outlook report had reservations about the rise. Although it recognises the advantages of the current low, it stated that the bounce back could have more harmful effects.
“The rebound in Sydney’s housing prices (currently rising by $3,000 a week) is welcome, but it’s also bad news. It will help NSW by boosting retail (soon) and housing construction (in a little while). But down the track the return towards diabolical rates of housing affordability will bite into NSW’s economic and population growth.”
Words by Kathryn Lee
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