How is property holding in 2015?
How is property holding in 2015?
2015 will be one of, if not the strongest year on record for new residential construction, particularly in Sydney.
With interest rates falling to new lows, are property prices set to rise even further?
There’s no doubt that 2014 was a good year for Australian property investors. In the 12 months to December, residential house prices jumped 6.8% nationally, driven by a stellar 12.2% rise in Sydney and healthy increases in Brisbane (5.3%) and Melbourne (4.5%).[1]
But according to Stephen Halmarick, Head of Economic and Market Research at Colonial First State Global Asset Management, we’re still a long way from a property bubble.
“Demand is not being driven by cheap credit, as it was in the sub-prime mortgage boom in the US, Ireland or Spain. Instead, lack of supply is driving the price increase. What’s more, official statistics reveal that housing credit growth isn’t out of hand,” he says.
“The household debt to income ratio in Australia has been flat for about a decade. At the same time, the cost of debt has fallen and incomes have increased.”
February’s 0.25% fall followed by May’s 0.25% cut in the Reserve Bank’s official cash rate has helped to push the cost of borrowing even lower. As a result, Halmarick says 2015 is one of the cheapest times on record to borrow money, with rates likely to fall even lower.
Demand set to remain strong
Halmarick says lower interest rates should continue to fuel demand for residential property, especially in Sydney, Melbourne, and Brisbane. It also means investors will earn less on savings and term deposits, which will mean many people will be looking elsewhere for better returns.
And low rates aren’t the only factor pushing prices up.
“Much of the demand is due to demographics: the population is growing in big cities, both naturally and through immigration, so there’s more demand for places for people to live.”
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