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Fastest Growth in House Prices Since 2010

By Siobhan Hawken

This month’s Reserve Bank decision to leave the cash rate on hold at 1.5% was almost unanimously predicted, with experts unified in the belief that recent lender increases have allowed the RBA “breathing space” before needing to move. The monthly survey from Finder.com.au showed 86% of the surveyed panel of experts believe the RBA’s next move will be upwards, although 70% believe it won’t occur until next year.

Regardless, all four major lenders hiked their mortgage rates on both investor and owner occupier loans during March, with the hardest hit category those borrowers using interest only facilities. The Australian Prudential Regulation Authority also weighed in on this segment, writing to all banks late last month to stipulate that new interest only loans must not make up more than 30% of all mortgage lending going forward.

The changes do not appear to be deterring buyers, with auction clearance rates continuing to be high and price growth at record levels. The latest Hedonic Home value Index from CoreLogic showed Melbourne prices have risen 15.9% over the past twelve months, gaining pace with growth of 1.9% in March alone. This is the fastest growth recorded in six years, with analyst Tim Lawless terming the growth “unsustainable”  and predicting a “slowdown or turndown” in the second half of this year.

At the same time, the “bubble” word is being used more frequently in reference to Sydney and Melbourne’s property market, with former Liberal leader John Hewson among those who say there’s now conclusive evidence. But a new report from Deloitte has said despite the strong growth, only a significant rise in interest rates or a drop in wages would trigger a drop in house prices, assuming no major tax reform or reduced population growth.   

Interestingly, the latest data from researcher SQM has shown the number of Melbourne properties for sale rose sharply in March, up 9.1%, as vendors rush to take advantage of the market conditions. SQM is standing by its predictions that Melbourne house prices will rise by between 10-15% over 2017.

With so many variables currently at play, there’s no telling what’s really around the corner. What is clear is that market conditions currently are extremely heated, with very willing buyers leading to great opportunities for above market results, particularly at auction.

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