Australian property prices are set to rise strongly this year as enthusiastic buyers and record low borrowing costs fuel the market, a leading housing economist predicts.
Releasing the inaugural REA Insights Home Price Index Report, realestate.com.au director of economic research Cameron Kusher said there has been a strong pick-up in the property market over the past year.
“There’s going to be strong price increases for the rest of this year and it could be as much as double-digit growth through 2021,” Mr Kusher said.
The REA Insights Home Price Index Report, released on Tuesday, showed national dwelling prices increased by 0.4% in February.
Property prices rose in each major region in February, with the largest rises in Darwin (0.9%) and regional Victoria (0.5%). Brisbane and regional Queensland recorded the smallest growth, both at 0.1%.
Dwelling prices have increased by 5.9% over the past year.
Mr Kusher said enthusiastic buyers, some driven by a fear of missing out, and record low borrowing costs were pushing prices higher amid a low volume of stock for sale.
“Property prices have clearly responded positively to state and federal government housing market stimulus along with the lowest borrowing costs on record,” Mr Kusher said.
“There’s also been a sharp rebound in sales volumes and mortgage borrowing along with consistently record-high volumes of Australians searching for properties on realestate.com.au.”
Mr Kusher said the REA Insights Buyer Demand Index, which measures the number of people who are serious about buying on realestate.com.au, was also at a record high.
“Clearly there’s a lot of interest in the market out there that is translating into sales, but there’s still a lot of buyers out there,” he said.
“There’s this sense that the market is moving quite quickly, that if you don’t get the property now and you have to wait a few more months then you’re going to be paying more for that property. There’s definitely a bit of a fear of missing out.”
Enthusiastic buyers, some driven by a fear of missing out, are keen to snap up properties. Picture: realestate.com.au/buy
Record low interest rates and government incentives like HomeBuilder, which finishes at the end of March, and first-home buyer grants and discounts are fuelling the housing market as the Reserve Bank of Australia leaves rates on hold for the next few years.
The RBA, which holds its monthly board meeting on Tuesday, does not plan to raise the cash rate from the current 0.1% until 2024 at the earliest.
“Borrowers can now access fixed rate mortgages from major lenders for less than 2% and clearly many are doing just that,” Mr Kusher said.
He said low borrowing costs along with increased savings and restrictions on overseas travel have increased demand for new mortgages. New home loan commitments rose 10.5% to a record $28.8 billion in January, according to Australian Bureau of Statistics figures released on Monday.
A number of economists have forecast strong growth in house prices over the next two years. Westpac economists said the housing market is moving into a sustained boom, predicting dwelling prices will rise by 20% in total over 2021 and 2022.
Releasing the latest REA Insights Property Outlook Report last week, realestate.com.au chief economist Nerida Conisbee predicted 2021 will be “a boom year” and feature a sharp acceleration in pricing.
Megan Neil
