What could curb the rising property market prices?
- Posted By Prince Lakshman
Home buyers including first timers got a surprise of their lives when property market prices soar to new heights despite the pandemic. The market boost was stimulated by government stimulus and very low interest rates. This resulted in buyers struggling to keep up to the rising prices.
The increase comes when numerous Australians are thinking about changing their housing preferences and seeking to upgrade in larger spaces or a better lifestyle. Due to the lack of supply in the market, this only intensified the competition and drove prices up.
Eliza Owen, CoreLogic’s head of research, said vendors haven’t really responded to the price increases in the past four months, which resulted in tight supply levels and growth rates accelerating further.
However, Ms Owens noted that as new listings are arriving to the market in recent weeks specifically across Sydney, Melbourne and Perth, it would allow buyers to have more choice and could potentially slow down the growth rate in the months to come.
It is still unclear the price growth could backpedal in the short term; however, there are still some influences that could curb its tremendous upswing.
For chief economist Shane Oliver, longer dated bond yields can dampen the growth if they go higher and could result in a pick up in four-year plux fixed mortgage rates.Furthermore, Mr Oliver believes that reducing immigration could further curb demand, especially in densely-populated areas.
First-home buyer activity, which has been fueled by government incentives, has pushed the boost in prices to an enormous degree. However, the activity could decrease as first-home loan deposit spots are taken up.
“The ones who might have bought in 2022 are getting in now with a 5 per cent deposit instead of a 10 per cent deposit,” he says.
“It could have an impact where first-home buyer demand has been brought forward, various home buyer incentives come to an end and we find at the same time underlying demand is weak and suddenly the property market weakens again.”
The Reserve Bank of Australia has time and time again said that the official interest rate won’t rise up until wage growth and employment rises and inflation is sustainable within the 2 to 3 percent range. These conditions are not expected until 2024.
Nevertheless, this does not dismiss the possibility of regulators stepping in should the unbridled prices propel risky credit growth.
“So far we haven’t seen a deterioration in lending standards,” Owen says. “If lending standards become a bit risky in the face of rapidly rising house prices, financial regulators can intervene to dampen lending and that will obviously dampen growth in the housing market.”
Buyers waiting for prices to fall may end up disappointed, says buyer’s agent and Good Deeds Property Buyers principal Veronica Morgan.
“For the people in 2013, 2014 and 2015 who were sitting on their hands waiting until prices came off the boil, prices didn’t come back to the levels they were at that point in time.”
Desperate buyers eager to make a move should avoid making hasty decisions that could cost them in the future, Morgan says.