Why Australian House Prices Will Fall

According to BIS Shrapnel, the threat of rising interest rates could be an indicator for the falling of Australian house prices in the following year. This is because the rise of interest rates will affect the affordability of the market in a negative way.

However, BIS Shrapnel also stated that this house prices crash prediction is still a little premature. In fact, according to their flagship report, the price falls will be quite minor if it really happens, which is only less than 10% of what the market experienced in the period of 2011-2012.

Meanwhile, the Australian house prices will likely still be moving up this year. In fact, it might even move in a higher pace in some areas like the south-east Queensland as well as in some regional cities like Cairns, Newcastle or Wollongong. This is due to undersupply condition that still exists in the market, also because the banks are still providing relatively easy loans for property buyers, which finally increases the demand. Rising demand in an undersupply market is automatically increasing house prices.

However, the 3 year prediction for Melbourne and Sydney doesn’t look so good. By mid 2018, many observers believe that the median house price in Sydney area will only be 2% higher than today’s price. While in Melbourne the rise will be a little higher, which is 4%, but still that’s a very small number. In Perth and Canberra on the other hand, prices will fall marginally. The prediction is even worse for apartment markets, only in Brisbane that the price seems to be a bit higher than today.

According to the senior manager of BIS Shrapnel, Angie Zigomanis, the level of apartment construction in major cities in Australia has created a disconnection between the balance of supply in the unit and house market and a discrepancy in price prospect.

In most major cities, apartment constructions are being done at record rates, encouraged by investors demand. When those apartment buildings are completed, high tenant demand is required to support rents and maintain values. The slowing down of the net overseas migration could definitely weaken the investor/rental sector, especially in resource based markets.

The key is to maintain high demand while maintaining just the right amount of supply of the housing units in the market. But of course this is not an easy thing to do, there are a lot of complexities involve, and looks like time is the only thing that holds the right answer to the future of this matter.

Is Australian in a Housing Bubble?

haveyoursay

Yes
39 Vote
No
12 Vote
50/50
2 Vote

Admin

Leave a Reply

Your email address will not be published. Required fields are marked *