Invest
House prices set to rise by 25 per cent, economist hints
National house prices could surge by as much as 25 per cent as the low cost of credit makes mortgages reach affordability levels not seen since 2002, according to an economist.
House prices set to rise by 25 per cent, economist hints
National house prices could surge by as much as 25 per cent as the low cost of credit makes mortgages reach affordability levels not seen since 2002, according to an economist.
BetaShares’ estimates are based on the median capital city national established house price, combined after-tax income for a male and female couple earning average ordinary time earnings, a 10 per cent housing deposit and the average bank mortgage rate for new owner-occupier loans.
As at the June quarter, the estimated median national house price was $700,000, average after-tax income around $135,000 – with the prevailing relevant mortgage rate for new loans (at present) around 2.9 per cent.
That implies that 26.2 per cent of after-tax income would have to be devoted to meeting mortgage repayments on a 25-year loan, compared with an average since mid-2004 of 32.8 per cent.
Based on current interest rates, national house prices would have to rise by 25 per cent from June quarter levels to reduce mortgage affordability to the average level since mid-2004, BetaShares chief economist David Bassanese said.
For affordability to be reduced to the recent lows in 2010 and 2017, house prices would have to rise by 35 per cent.
“History suggests that the way the market will find equilibrium under these circumstances is through a lift in house prices, until mortgage affordability for the marginal buyer is reduced to at least the long-run average – if not pushed to previous trough levels if a bubble mentality develops,” Mr Bassanese said.
The economist points to 2002 when house prices surged due to affordability.
“The last time our national mortgage affordability estimate was better than this was in March 2002. In the following two years, national house prices rose 36 per cent. What we know from history is that when mortgage rates drop, new home buyers don’t just pocket the savings – they simply bid more for properties as their affordability limit has improved,” the economist said.
The economist also said that the RBA’s comments around not lifting interest rates for up to three years or until they reach the 2 to 3 per cent inflation target band is also likely to spur on the housing market.
About the author
About the author
Property
Millennials believe first home buyers need more support
Australia’s up-and-comers in the housing market say more needs to be done to slow rising house prices. ...Read more
Property
3 in 4 borrowers in trouble are in lockdown: ANZ
Despite offering support, ANZ said freezing home loan repayments will be the last resort, as three in four requests for support stem from NSW. ...Read more
Property
RBA gives APRA’s use of macro tools a tick of approval
Ahead of an expected move to impose tougher lending rules on the banks, the Reserve Bank has looked into previous attempts by APRA to cool the housing market. ...Read more
Property
Federal incentives are driving more first home buyers into the market
While property prices continue to grow, new research suggests that the government’s current crop of first home buyer incentives is having an impact on this segment of the market. ...Read more
Property
Why it now costs 130% more to service a mortgage than 3 decades ago
The lifetime cost of owning a home has increased by over 130 per cent in just three decades, new research has revealed. ...Read more
Property
Using the 30/30/3 rule for home buying during uncertain times
Thinking of buying a home? Uncertain economic times may have you double guessing your purchase, but the 30/30/3 rule can help you make this a reality. ...Read more
Property
Rental yields reach decade high, but not all markets move at the same pace
Changing consumer preferences towards lifestyle destinations and a lack of supply have led to record national price growth, albeit price fluctuations vary region-to-region, fresh figures show. ...Read more
Property
What younger Australians are getting wrong about home loans
As young Australians look to fight the odds and take their first step onto the property ladder, more and more are making easy mistakes. ...Read more
The Olympic effect on property and equity investors; COVID-19 Disaster Payments and super
Listen now
Do lockdowns boost property prices? Are short-sellers levelling the playing field? Did you lodge your tax returns early?
Listen now
Will lockdowns halt the housing boom? Is the metaverse taking over? And the cons of lodging your tax returns early
Listen now
Are you being priced out of the market? Have you got the Tuesday blues? And are you ready for the upcoming super changes?
Listen now
Property
Millennials believe first home buyers need more support
Australia’s up-and-comers in the housing market say more needs to be done to slow rising house prices. ...Read more
Property
3 in 4 borrowers in trouble are in lockdown: ANZ
Despite offering support, ANZ said freezing home loan repayments will be the last resort, as three in four requests for support stem from NSW. ...Read more
Property
RBA gives APRA’s use of macro tools a tick of approval
Ahead of an expected move to impose tougher lending rules on the banks, the Reserve Bank has looked into previous attempts by APRA to cool the housing market. ...Read more
Property
Federal incentives are driving more first home buyers into the market
While property prices continue to grow, new research suggests that the government’s current crop of first home buyer incentives is having an impact on this segment of the market. ...Read more
Property
Why it now costs 130% more to service a mortgage than 3 decades ago
The lifetime cost of owning a home has increased by over 130 per cent in just three decades, new research has revealed. ...Read more
Property
Using the 30/30/3 rule for home buying during uncertain times
Thinking of buying a home? Uncertain economic times may have you double guessing your purchase, but the 30/30/3 rule can help you make this a reality. ...Read more
Property
Rental yields reach decade high, but not all markets move at the same pace
Changing consumer preferences towards lifestyle destinations and a lack of supply have led to record national price growth, albeit price fluctuations vary region-to-region, fresh figures show. ...Read more
Property
What younger Australians are getting wrong about home loans
As young Australians look to fight the odds and take their first step onto the property ladder, more and more are making easy mistakes. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
