With property prices continuing to jump, investors are buying houses in the hope of being able to sell for a profit in only a few years
Australian property prices are set to rise by another $200,000 this year locking more young people out of real estate thanks to record-low interest rates.
Sydney’s median house in April increased by 2.8 to a record high of $1.147million as Melbourne’s equivalent value jumped by 1.4 per cent to $869,676, CoreLogic data showed.
A Finder survey of 40 economists and real estate experts expected house prices in Australia’s biggest city to jump by 21 per cent in 2021 as record-low interest rates encouraged borrowers to snap up property in a nation that has contained Covid.
With property prices continuing to jump as unemployment falls, investors are buying houses in the hope of being able to sell for a profit in only a few years.
That would see Sydney’s mid-point price, compared with December’s $1.015million, jump by $213,224 by the end of this year to $1.229million.
Melbourne’s median house prices was expected to increase by an annual pace of 15 per cent or $120,000 to $920,000 as Brisbane’s mid-point rose by 17 per cent or $100,000 to $674,315.
Perth prices were expected to rise by 15 per cent or $73,621 to $564,432.
In November, the Reserve Bank of Australia (RBA) cut interest rates to a new record-low of 0.1 per cent.
Since late last year, real estate values have soared, with three of Australia’s big four banks offering fixed mortgage rates under 2 per cent.
The Westpac bank is predicting property prices will climb by 15 per cent in 2021 before slowing to 5 per cent in 2022.
Previously, it had forecast 10 per cent increases this year and next.
Westpac senior economist Matthew Hassan said 2021 would see a ‘fully–fledged, broad-based boom’.
Interest at levels close to zero more than offset the consecutive months of downturn during the Covid lockdowns of 2020 as public auctions were banned.
Bendigo Bank head of economic research David Robertson said the RBA was now more likely to raise the cash rate in late 2022 instead of 2024 as promised earlier this month.
The current pace of economic recovery combined with fiscal and monetary stimulus may bring this forward to late 2022, but the RBA would prefer to wait for other central banks, New Zealand and Canada, to move first, before exiting zero per cent interest rates, he said.
With prices continuing to surge, this month’s federal Budget announced a Family Home Guarantee which would allow single parents, with taxpayer support, to take out a loan with a just a 2 per cent deposit instead of the usual 20 per cent deposit.
Weekend capital city auction clearance rates stood at 75.7 per cent, with Sydney’s level for the last week of April at 81 per cent, CoreLogic data showed.
Mr Hassan said a slowdown was more likely than a plunge next year. There is nothing but a slight cooling off from “red-hot” to “hot” at best, and it is not really a sign things are about to turn cold, he said.
But price growth was likely to slow down in 2022 with Mr Hassan predicting that affordability problems in the big cities would turn off buyers.
