Australian Property Market Outlook 2015

The prop­erty mar­ket is help­ing us to become the wealth­i­est pop­u­la­tion in the world

First off an inter­est­ing fact. Even when tak­ing into account the impact of infla­tion, the growth in cap­ital city res­id­en­tial prop­erty val­ues has made Aus­tralia one of the wealth­i­est nations in the world.

A recent art­icle in the Sydney Morn­ing Her­ald sup­ports the notion that prop­erty has made many Aus­trali­ans wealthy:

Thanks to their prop­er­ties, Aus­trali­ans are the wealth­i­est people in the entire world.…. Well that’s what the invest­ment bank Credit Suisse think. The 5th yearly study con­duc­ted by the Swiss bank of global wealth trends found the median Aus­tralian adult was worth more than $US225,000 ($258,000) in June, well ahead of the second wealth­i­est pop­u­la­tion on this meas­ure, the Bel­gians, at $US173,000.”

Which dir­ec­tion will the RBA go from here?

people pulling 2015 property market outlook

If you want to under­stand the RBA’s cash rate decisions, its worth keep­ing an eye on the Aus­sie dol­lar. The Aus­sie dol­lar drop­ping in value against the USD (which is hap­pen­ing at the moment), the­or­et­ic­ally gives the RBA more flex­ib­il­ity to lift rates. A lift in infla­tion could poten­tially mean a rate rise. As it is, infla­tion remains low mean­ing vari­able interest rates should stay low. Some are even pre­dict­ing 1 more interest rate cut this year.

Com­ment­at­ors are say­ing it will not have much effect on the prop­erty mar­ket, but they do not dis­cuss sub-markets. As for west­ern Sydney as a whole it will con­tinue to grow but not as much as last year.

Why are house prices con­tinu­ing to rise?

It has been long estab­lished that the cost of Aus­tralian hous­ing has been on the rise because of a lack of sup­ply. Strong pop­u­la­tion growth has fur­ther added to  the dam­aging impact of this sup­ply short­fall. Basic­ally the demand for hous­ing is exceed­ing the rate of sup­ply. Gov­ern­ment reg­u­lat­ory demands, par­tic­u­larly in cap­ital cit­ies, have gradu­ally pushed up the price of one of our most fun­da­mental needs, that is, shelter.

John Edwards of Residex (who meas­ure prop­erty trends) has said: “It is this high level of un-affordability that prob­ably leads many to think we are in a “hous­ing bubble”. How­ever I don’t think so, as some­thing has shif­ted: The buy­ers in the prop­erty mar­kets. Our meas­ure is more than likely no longer as use­ful as it once was, because the buy­ers in this mar­ket are no longer aver­age income fam­il­ies. Middle-income fam­il­ies resid­ing in the aver­age priced areas of Sydney are mostly renting.

Give it to me straight doctor.…

Well you asked for it, “It’s the gov­ern­ment reg­u­lat­ory scarcity (releas­ing of land) that is driv­ing Aus­tralian house prices to massive levels of unaf­ford­ab­il­ity, not just SMSF and Chinese investors. Immig­ra­tion into Sydney and Mel­bourne are at an all-time high, so cut­ting red tape and loosen­ing of constraints/land is the only way to bring house prices within reach of younger people’s incomes.”

The chart below sums up the afford­ab­il­ity situ­ation around Australia.

The chart below sums up the affordability situation around Australia.

Property Market outlook

When will hous­ing price growth slow?

Hous­ing price growth will slow from it’s dizzy growth over the past 18 months (phew!). How­ever, East­ern States will con­tinue to see sig­ni­fic­ant growth. Bris­bane 17%, Sydney 9%, Mel­bourne 5%, Adelaide 6% and Hobart 6%. Lag­ging some­what behind will be Dar­win 2%, Can­berra 1% and Perth is expec­ted to a decline of about 2% over the period.

Eco­nomic growth at the national level is expec­ted to remain sub­dued. As a res­ult, there seems to be no sig­ni­fic­ant incent­ive for the RBA to rush and raise interest rates. Over the fore­cast period, interest rates are expec­ted to rise by only 1%.

It is appar­ent that the num­ber of first home buy­ers con­tin­ues to abate (pos­sibly not as sig­ni­fic­antly as some may believe). Cur­rently, investors are by far the most act­ive mar­ket seg­ment. Although, this is expec­ted to go on, their num­bers will slowly dwindle due to rising prop­erty prices and rising interest rates impinging on returns.

About 

With expert­ise span­ning mort­gage lend­ing, prop­erty law, prop­erty invest­ment and bor­row­ing to invest within Self Man­aged Super­an­nu­ation, Aaron Sains­bury offers more than 25 years pro­fes­sional advis­ory expertise.

He is an enthu­si­astic sup­porter of fin­an­cial lit­er­acy, work­ing closely with cli­ents to help them gain and main­tain con­trol of their fin­an­cial future.

Aaron is thor­oughly com­mit­ted to build­ing lifelong rela­tion­ships with cli­ents based on the highest qual­ity ser­vice, advice and trust.

Con­tact Aaron dir­ect on 02 9818 8643 .

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