What are the signs to look for in the Property Market?? Rod Cornish – Division Director, Macquarie Capital (Real Estate) The property market can be unpredictable but there are signals to look for that can help you stay ahead of the curve. The main drivers of the residential property cycle are affordability, interest rates, changes to migration levels and the economic outlook. Affordability has the biggest effect. Interest rates, house prices and wages feed into affordability. Interest rates are low now and aren’t expected to change much until 2015. Even then, it will take a few rate rises to change the market’s direction. The annual change in mortgage interest rates is the figure to watch. Mortgage rates now are around 6 per cent. If they rise to, say, 7.25 per cent over a year, that’s when the market is likely to start weakening. Unless inflation increases more rapidly than expected and wages start rising quickly, it’s unlikely interest rates will rise this year. There will be increases over the next few years, which will affect affordability. Changes in migration levels, due to government policies affecting overseas arrivals or changes in state economies for instance, also affect the property market. More people moving to an area means higher demand for accommodation, pushing prices up. Conversely, markets typically fall when there’s a drop in net migration – the number of people who arrive in a state less the number who leave. Net migration to NSW (including overseas and interstate movements) increased by 34 per cent over the 2013 calendar year. In Victoria, migration levels rose 17 per cent in 2013. In Western Australia on the other hand, migration levels fell 25 per cent, and migration into Queensland is also below the long-term average for the state.
Posted on: Sat, 11 Oct 2014 01:03:49 +0000
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