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On this episode of The nestegg Podcast, host Maja Garaca Djurdjevic and three experts discuss the latest in equities, property investing and super.

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Steve Waters, director of Right Property Group, chats about the latest in property, including the much-talked-about use of macro-prudential measures to cool the rapidly expanding market.

RMIT’s senior lecturer of finance, Dr Angel Zhong, talks about soaring ETFs, what they are and why young investors, in particular, are jumping onboard their latest surge. Dr Zhong also takes a closer look at BNPL platforms.

And lastly, tax and super guru Timothy Munro gives his thoughts on Prime Minister Scott Morrison’s choice to backtrack on any further SG changes and looks at the impending end of the low and middle income tax offset.

Have a question for our experts? Get in touch at [email protected] and you might get featured on the next episode.

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House prices set to rise by 25 per cent, economist hints

By Cameron Micallef

December 15 2020
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Invest

House prices set to rise by 25 per cent, economist hints

By Cameron Micallef
December 15 2020

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

By Cameron Micallef

December 15 2020
Share

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.

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About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron Micallef

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