Rate rises hurt house price growth

Rate rises hurt house price growth

by 0 comments

House price growth is expected to slow in 2010 after exceptionally strong annual growth in 2009.

According to Australian Property Monitors’ March Quarterly House Price report, the 2010 annual rate of national house price growth should settle in the eight to 10 per cent range.

While national house prices managed to climb 3.1 per cent during the March quarter, the growth was slower than anticipated, thanks to five interest rate rises and the expiration of the First Home Owner Boost.

Australian Property Monitors economist Matthew Bell said all capital cities except Adelaide and Darwin saw the rate of growth fall in March compared to December 2009.

“Rising interest rates are clearly having a significant effect,” Mr Bell said.

“Housing finance has now been falling for five months and, historically, price growth has tended to slow significantly six to nine months after finance starts to decline. This means that if past trends hold, house price growth should moderate further in the coming quarters.

“Countering this interest rate effect on the demand side is continued strong population growth, rising incomes, falling unemployment and very strong consumer and business sentiment. On the supply side, new dwelling commencements are still well under levels needed to satisfy current demand, let alone begin to eat into the existing deficit of affordable property. All reports of borrower performance point to mortgage arrears remaining at very low levels. All these factors have been crucial in the housing market continuing to rise in value even as rates have returned to normal levels.”

House price growth is expected to slow in 2010 after exceptionally strong annual growth in 2009.

According to Australian Property Monitors’ March Quarterly House Price report, the 2010 annual rate of national house price growth should settle in the eight to 10 per cent range.

While national house prices managed to climb 3.1 per cent during the March quarter, the growth was slower than anticipated, thanks to five interest rate rises and the expiration of the First Home Owner Boost.

Australian Property Monitors economist Matthew Bell said all capital cities except Adelaide and Darwin saw the rate of growth fall in March compared to December 2009.

“Rising interest rates are clearly having a significant effect,” Mr Bell said.

“Housing finance has now been falling for five months and, historically, price growth has tended to slow significantly six to nine months after finance starts to decline. This means that if past trends hold, house price growth should moderate further in the coming quarters.

“Countering this interest rate effect on the demand side is continued strong population growth, rising incomes, falling unemployment and very strong consumer and business sentiment. On the supply side, new dwelling commencements are still well under levels needed to satisfy current demand, let alone begin to eat into the existing deficit of affordable property. All reports of borrower performance point to mortgage arrears remaining at very low levels. All these factors have been crucial in the housing market continuing to rise in value even as rates have returned to normal levels.”

promoted content
Recommended by Spike Native Network
Listen to other installment of the Real Estate Business Podcast
reb top 100 agents 2016

With a combined sales volume of $13 billion in 2016, the Top 100 Agents ranking represents the very best sales agents in Australia. Find out what sets them apart and learn their secrets to success.

featured podcast

featured podcast
How this agent's commitment to clientele built him a 25k-strong client base

In this episode of Secrets of the Top 100 Agents, host Tim Nearly talks to RT Edgar’s Glen Coutinho who ranked number six in this year’...

View all podcasts

How effective are testimonials as a marketing tool?

Not effective at all
Somewhat effective
Very effective
They are the most effective tool there is
Do you have an industry update?