Listing shortage will drive prices
Historically low-interest rates are enabling more Australians to buy a home but a shortage of listings will continue to push up prices, according to leading property network LJ Hooker.
Chief executive Grant Harrod said today’s decision by the Reserve Bank of Australia to leave rates on hold is not surprising, however, softer employment and inflation figures makes it more likely by mid-year.
A reduction of interest rates will not cause another property boom, Mr Harrod said, but warned fewer listings means more pressure on prices, particularly for freestanding homes in inner and middle ring suburbs.
``The RBA likes to look at affordability and while low interest rates are helping people get into the market what is driving price is the massive shortage of stock, not investors or people speculating.‘’ he said.
``The market is still down significantly on listings especially if we look against the last five to 10 year average.’’
Low stock levels are also driving Melbourne’s residential market, which is expected to outperform Sydney in 2016; while Brisbane is enjoying a solid start to the year fuelled by interstate buyers looking for affordability.
Apartment developments are not expected to ease continued demand for houses and medium density dwellings in the Sydney’s inner and middle ring suburbs.
Auction clearances rates have also increased heading into the autumn as homeowners look to either upgrade or downsize.
Mr Harrod believes there is still some room for price growth in the Sydney market but this will be at lower levels seen over the past few years as the affordability ceiling is reached. A lack of listings could see potential vendors - frustrated by the lack of options - choose to renovate instead of moving.
``What worries me is that the RBA might think it has to increase rates to slow the property market but what is actually driving price growth is the volume and it could make the situation worse.’’ Mr Harrod said
Mathew Tiller, Head of Research for LJ Hooker, said economically there is room to justify a reduction in interest rates. As there is no longer a guarantee the banks would pass on a whole cut to mortgage holders, it could give the RBA confidence to act.
``It will be a matter of if they think they need to do it to stimulate the broader economy outside the housing market,’’ he said.