Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.

House price growth to stall

Staff Reporter 4 minute read

By: Staff Reporter

A slow-down in house price growth is on the cards, according to BIS Shrapnel.

The economic forecaster has revealed in its latest Residential Property Prospects report that lending activity is already easing, with first home buyer demand in the March quarter of 2010 down by 44 per cent on the same period last year, and upgrader activity plateauing.

This is flowing through to softer demand for residential property.


In addition, rising interest rates are also taking their toll of housing affordability.

“The strong price growth in the second half of 2009 was a rapid adjustment to housing variable interest rates that were at 40-year lows,” BIS Shrapnel senior project manager Angie Zigomanis said.

“With interest rates quickly lifting from these ‘emergency’ levels, and the current variable rate of 7.4 per cent now being close to long term trends, the recent levels of price growth cannot be maintained.”

But while BIS Shrapnel expects house price growth to ease, it does not forecast a fall.

According to the report, investors are beginning to return to the market and pick up some of the reduction in owner-occupier demand, with loans to investors up 26 per cent in the March quarter.


While rental growth did slow in 2009, part of the slowing was due to first-home buyers moving from rental to owner-occupation, as well as the lower interest rates reducing the incentive for landlords to pass on further interest rate rises.

“Even though overseas migration inflows are steadily easing, a deficiency of stock is still in place with dwelling construction below underlying demand,” Mr Zigomanis said.

“This is expected to put pressure on vacancy rates and result in stronger rental growth later in 2010. The deficiency of dwellings, and improved rental picture, will continue to maintain investor demand and assist prices.

“In addition, the current round of interest rate rises is expected to have run its course, with further rises expected to be more moderate.

“Our forecast is for the cash rate to increase by 50 basis points in 2010/11, and a further 50 basis points in 2011/12.”

House price growth to stall
TheAdviser logo

If you’re feeling overworked and overwhelmed in this fast-paced mortgage market, it’s time to make some changes, and the Business Accelerator Program can help! Early bird tickets are on sale now. Work smarter, not harder, this year.



more from the adviser
handshake news Ex-broker head to lead MyState banking

A former broker head has returned to MyState Bank to tackle turna...

BBS 2021 ta SA/NT’s top brokers crowned

The leading brokers in South Australia and the Northern Territory...

Paul Kearney ta AFCA recruits from ME Bank

The complaints authority has named a new executive general manage...