Median House Price Projections for 2014 and Beyond

Mortgage Brokers Discuss the Australian Housing Outlook ReportEvery year, our mortgage brokers at Smartline Mortgage Brokers Rockingham look forward to the Australian Housing Outlook report, which is prepared for QBE Lenders Mortgage Insurance by BIS Shrapnel. Since QBE LMI’s income depends upon risk assessment and astute market information and they are now the second largest mortgage insurer in Australia, they have a lot riding on the accuracy of the report.

So far, the Australian Housing Outlook report has gained a reputation for startling accuracy and is seen as a great barometer for future market movement. The report can be seen in full at this link, but we would like to tell you about the parts we feel are important, why they are important, and what they may mean to you.

The Overview

After two successive years of negative performance, the Australian housing market finally showed signs of recovery 2012/2013. While other world economies continued to suffer the after-effects of the Global Financial Crisis, Australia’s Gross Domestic Product rose 3.4% over the year 2012.

Based on the strength of Australia’s strong performance, BIS Shrapnel have predicted that the Perth market will grow by 16.7% by 2016 and that other capital cities with what they call a “deficiency in housing stock” will see the greatest growth, including Sydney at 18.0%, Brisbane at 16.4% and Darwin at 7.8%.

Interest rate drops didn’t have their desired impact when they began in November 2011 due to what BIS Shrapnel saw as “low affordability” at the beginning of the cycle. However, affordability increased in 2012 and 2013 as interest rates fell to record low levels. First home buyers and investors had their say in the market, which is now quite healthy.

In Perth, this is especially true due to the $10,000 First Home Owners Grant (FHOG) on new housing.

Perth Property Prices

Though we write most of our home loans in Rockingham, Kwinana and Baldivis, we are still part of the Perth housing market and this report will cover the Perth market prices. Remember that these are median prices, meaning that if 2999 houses are sold, the house in the 1500 position on a list of prices from highest to lowest or lowest to highest will be considered the median.

Prices are computed for the year ending June. In June 2013, the end of the 2012-2013 year, the median price in Perth was $514,000. By June 2014, it is projected to rise to $555,000 for a rise of 8%. It should be noted that in the November month end report, the median price was $535,000, which put it halfway to its projected rise.

By June 2015, the median price is expected to rise to $585,000, which works out to 5.4%. By June 2016, the price is expected to rise another 2.6% to $600,000. This means that in three years, the price will have risen 16.7% from $514,000 to $600,000.

What the Australian Housing Market Report Means to Us

We agree with the tone of this report. We have seen with our own eyes that the Australian housing market is alive and well. We have watched consumer confidence slowly begin to rise as interest rates lowered. We see a continued, slow rise in the housing market. We also know that interest rates aren’t going to stay low forever.

What the Australian Housing Market Report Means to You

We are making the same recommendation we have been making for a year now: buy now and save money. Every month that you wait can take thousands of dollars out of your pocket over a 30-year loan.

The interest rate was lowered to stimulate borrowing, while the First Home Owners Grant has been slanted towards new homes to help stimulate the construction industry. We think both are doing exactly what they were intended to do. However, remember that lower interest rates only last as long as the market needs them. As soon as the market fully recovers, interest rates will begin to rise again.

Over the last year, interest rate drops have coincided with housing average gains to level out the costs of housing. However, as soon as the interest rate stops falling, buyers will feel the effects of rising housing prices. As the market improves, interest rates and home prices will rise at the same time, resulting in higher home loan repayments.

Call Smartline Mortgage Brokers Rockingham

If you are thinking about buying a house in the next three years, it is time to take action. Call us on (08) 9527 1800 or fill out our contact form. Take advantage of low interest rates and save money.