House surge may slow
Yellow Brick Road founder Mark Bouris says conditions aren’t about to get worse for homebuyers thinking about getting into the market,
GEELONG homebuyers could find some relief from fast-rising house prices with growth set to slow, a new report released today forecasts.
The QBE Australian Housing Outlook predicts growth in Geelong’s median house price to moderate to 4 per cent over 12 months by June 2018.
The BIS Oxford Economics report authors’ prediction came as the outlook showed Geelong’s median house price climbed 12.6 per cent to $475,000 in the year to June.
But capital growth is expected to flatten out beyond June 2018, to a median house price of $495,000 at June 2020, giving buyers finding it hard to break into the market some hope of increasing affordability.
Geelong’s property market has become the darling of Melbourne and Sydney investors and homebuyers attracted to the city’s cheaper house prices.
Falling vacancy rates, which dropped to 2.2 per cent in June, show a tightening rental market, which also fuelled gains for investors, according to the report.
The demand is driving the strong growth in house prices, not only in inner city suburbs like Geelong West and Manifold Heights, but in cheaper areas like Corio and Norlane, where capital growth hit 17 per cent in July, according to CoreLogic data.
The positive outlook for the region’s economy also contributed to the growth.
The city’s transition to the services sector and the construction boost from the relocation of WorkSafe Victoria and the National Disability Insurance Agency to Geelong were the biggest contributors to jobs growth in the region, somewhat offsetting losses in 2016 from the closure at Ford.
Unemployment dropped from 8.4 per cent in March 2015 to 6.3 per cent this year.
While Geelong maintains an affordability advantage for homebuyers over Melbourne, the report’s authors believe the fast rate of price growth this year and increasing competition from Melbourne’s outer western suburbs for buyers would slow growth.
The report expects Melbourne house prices to rise 10 per cent to a $940,000 median over the forecast period, although unit prices were expected to fall 5 per cent.
The three-year forecast shows Ballarat prices climbing 6 per cent, and 5 per cent growth in Bendigo.
QBE Lenders’ Mortgage Insurance chief executive Phil White said strong net migration would create a need for more homes in the next 15 years.
“The forecast population growth raises questions about whether our property market will have us on track to meet short, medium and long-term population challenges,” he said.
“The demand curve is flattening mainly because people realise house prices have been going up for a long period of time.” — Mark Bouris
HOMEBUYERS concerned they’re going to take an interest rates hit this year needn’t be concerned, according to mortgage finance entrepreneur Mark Bouris.
The founder and chairman of Yellow Brick Road told a Geelong audience on Monday that recent Reserve Bank statements on monetary policy showed the central bank wasn’t about to move on interest rates, contrary to the view of many market commentators.
The official interest rate has remained at the record low 1.5 per cent for 14 months, although lenders have increased the cost to borrow money in that time.
Mr Bouris said mortgage affordability was one of the positive factors on the supply side of the real estate market that could lead to improving housing affordability in the short term.
The host of The Apprentice Australia said pundits were off the mark in saying capital city real estate markets were overcooked.
But he said buyers did believe that property prices were too high, a factor in why he believes demand for property is slowing.
“I think demand is slightly flat,” Mr Bouris told the audience at The Pier.
“Prices are seen as genuinely high and demand has dropped. But that doesn’t mean it’s not a good asset class (to invest in). The demand curve is flattening mainly because people realise house prices have been going up for a long period of time.”
He said investors considering the property market needed to buy with a long-term strategy of at least seven years.
Mr Bouris said the supply side of the real estate equation was providing good signs for buyers thinking about entering the property market.
While wages haven’t risen in real terms for the past six years, Mr Bouris said the Reserve Bank board had stated it had noticed early signs of wages demand over the next two years.
The impact on paying off Australia’s record high household debt was a factor in the Reserve Bank holding interest rates, Mr Bouris said.
“Where household debt could become a problem is if interest rates went up across the board, like on credit cards,” he said.
He said the bank’s charter meant it had to consider the impact of monetary policy on the welfare and prosperity across the entire economy, not just to act on house prices.
“The Reserve Bank is not inclined to put up interest rates for a long time. Do you think the Reserve Bank is going to go out and make a problem?,” he said.