The Australian housing market appears to have a strong footing, with a price rise of 1.3 percent in capital city home prices during January of 2015. However, many suggest that there may be cracks forming in its foundations.
Housing Market Data Dictated to By the Larger Capital Cities
While the overall result appeared strong, housing market performance varies greatly across the capital cities. According to data released by the CoreLogic RP Data Home Value Index, the larger cities, which have more properties, pushed the index higher.
In Melbourne, property values rose by 2.7 percent during January, and Sydney increased by 1.4 percent. Hobart recorded a 1.3 percent fall and Perth a 1.2 percent decline.
CoreLogic RP Data’s head of research Tim Lawless says that this is evidence that the Australian housing market is cooling. Plus, all Australian capital cities are showing a slower than average annual rate of appreciation.
Dwelling Growth Rate is Slowing
At the end of January, says Lawless, the annual rate of dwelling value growth slowed to 8.0 percent across the combined capital index. This is down from 11.5 percent in early 2014.
The slower rate of appreciation is a sign that housing demand is tapering, despite interest rates hitting historical lows. This could possibly be attributed to the fact that many Australians are fearful of another economic crisis and are holding their financial cards close to their chest.
National Australia Bank Data Confers with CoreLogic’s Data
The National Australia Bank (NAB) agrees with Lawless, as the residential property index fourth quarter report reveals that falls in activity have been recorded across all states except Victoria. The report also disclosed that foreign investment in housing and apartments has cooled over the last quarter.
NAB senior economist Alan Oyster suggests that rising unemployment, slow household income growth and low housing affordability were all contributing factors to this cooling. Other factors were rising inflation and high existing levels of debt.
Other suggestions are that with the lower rates of interest home owners were focusing on paying off their mortgages, and those looking to buy their first home were focusing on saving a deposit now, rather than later.
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Written by eChoice