House Price Bubble
Fears of a housing price bubble have given way to modest expectations about future price rises. The growth forecasts have reduced from 6 and 10 per cent to between 5 and 8 per cent for this year. Experts say property value is unlikely to crash as demand continues to grow due to low interest rates and population growth.
After a consistent rise for over a year, RP Data recorded price falls in May with Sydney dropping 1.1 per cent, Melbourne 3.6 per cent, Brisbane 1.7 per cent and Perth 0.8 per cent. Growth has moderated in the country’s hottest market, Sydney, where prices increased by 15 per cent last year.
Auction clearance rates have decreased in Sydney and Melbourne from 80 per cent plus last year to high 60s and low 70s. However properties in high demand areas such as Sydney’s Western suburbs are selling within a fortnight of listing. Buyers are eager and competitive with sellers accepting offers before auctions.
RP Data research director Tim Lawless believes that market was slowing and prices haven’t peaked but demand exceeded supply. Low rental yield will most likely deter investors in areas such as Sydney and Melbourne where recently the yields have been the lowest and capital gains have been the highest.
With an expected 31 per cent rise in new housing in 2014-15 according to BIS Shrapnel senior manager Angie Zigomanis, prices would weaken in Melbourne but would take much longer to meet demand in Brisbane and Sydney. Reserve Bank interest rates could rise towards the end of 2015, having a negative affect on affordability in 2016.
RP Data’s Tim Lawless said Brisbane was better placed for growth compared to Sydney and Melbourne mainly because prices are 50 per cent lower and yields higher.
Property Investors go to http://www.pru.com.au/property-investment
