Recent interest rate reductions have not been drastic enough to allow significant house price growth – or worse, inflate a housing market bubble, claims Residex founder John Edwards.
Edwards said that affordability is keeping the industry in check, because a lot of families are likely to still think they are better off renting.
Residex figures show the amount of money that a family has leftover to spend after monthly loan repayments are paid ranges between $880 (Sydney) and $1,457 (ACT). Disposable income after rent is paid ranges from $1,057 (Hobart) and $1,537 (ACT).
“I’m sure that most of us with a small family would consider living on $1,000 per month somewhat difficult,” Edwards said. “When looking at the table in this light, the median family buying the median home is very constrained by affordability… they’re better off renting.”
Edwards said that the realisation that renting is a better option will take hold, but the lack of security of tenure will be influencing many people and causing them to accept the more difficult option.
“Ownership of house and land assets is going to become less prevalent and ownership of units will become more of the norm in time. Additionally, renting will become more prevalent in city areas,” he said.
Edwards added that if demand can be expected to be limited due to affordability, there will also be a limit on the rate of capital growth.
“Given the view that interest rates are unlikely to fall much further and house prices probably won’t fall in value by any significant amount, properties that are most likely to see growth are those located in areas with better affordability.” Reproduced in full with permission: Your Investment Property No bubble says Residex
30 May 2013 Attention: This article is intended to provide general information only. Every attempt has been made to ensure the accuracy of this information at the date of publication. The opinions expressed in this article do not reflect those of DHA, its staff or agents. Property prices are subject to fluctuation. Prospective investors should seek independent advice. DHA will not be liable for any loss, damage, cost or expenses incurred or arising by reason of any person relying on information in this article.