The volume of dwelling sales rose by 10% nationally in June, demonstrating there is still a lot of heat in the market.
This is despite the ‘bubble’ atmosphere in Sydney where home sales jumped 16%.
However respected analyst BIS Shrapnel warns that Sydney and Melbourne home prices will start falling from late 2016.
Why? They identify:
1) Increasing interest rates
2) Significantly greater supply
3) Decreasing migration
4) Declining affordability
5) Weaker investment returns
UBS senior economist, George Tharenou, says the inevitable interest rate hike, also predicted for late 2016, will be the trigger as it was in 2003, 2007 2010. He says the average price to income ratio is currently 5.5 which is the same high level as in those bubble years.
This is an interesting statistic given the concern for housing affordability of capital cities. With the average Australian wage being $80,000, at 5.5 income ratio this worker can afford a home of $440,000. A search today on realestate.com.au for homes under $450,000 in Sydney’s Southwest turned up 259 properties - more than expected. This indicates there remains an accessible market out there, supporting affordability.
The heat in the market is not national however. RP data is quoted by the Property Council: “While values in Sydney and Melbourne have increased by 16.2% and 10.2% over the financial year respectively, every other capital city has seen growth of less than 5% and dwelling values are down over the year in Darwin (-2.9%) and Perth (-0.9%)”.
In fact, the median price for a home in Perth dropped from $616,826 to $599,574 according to Domain Group.
Nationally, new housing starts also continues to break records but will also come home to roost with the additional supply when interest rates rise, stated Domain Group, adding: “Nationally, the latest ABS Building Approvals data shows continued growth, with 218,442 new dwellings approved in seasonally adjusted terms for the 12 months to May 2015, up from 192,561 approvals for the 12-month period to May 2014. Building approvals increased 2% on the April 2015 figure and rose 13% year-on-year”.
So the good times roll on for village marketers - except in Perth and Darwin.
