Australia’s house price rises are now topping the world, with some commentators claiming the soaring cost of property is like a Ponzi scheme.

The Reserve Bank of Australia (RBA) is monitoring lending to property investors as the signs of a continuing property boom continue with borrowing by real estate speculators at record highs.

Holding cash rates at all-time low rates, the RBA said:  “There has also been increased borrowing by investors. Given the environment of rising housing prices and low interest rates, the bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.”

House prices are surging, as the below CoreLogic table demonstrates, with Sydney leading the pack. The medium house price in Sydney is now $1.186m – up 3.5 per cent in just four weeks.

Melbourne and Brisbane gained 2.2 per cent, Adelaide and Canberra were up by 2.1 per cent and Hobart by 2.7 per cent.

Regions were also rising as families moves out of cities.

AMP Capital chief economist Shane Oliver is predicting another 10 to 15 per cent this year, but he says the market may slow in 2023 – because we won’t be able to afford to buy new homes because lending will be restricted.

Right now, low loans – and the Reserve Bank yesterday said rates are likely to stay low for another two years –  and a lack of property coming onto the market are fuelling the fires of price hikes. Jobless numbers are falling as Australia’s “miracle economic recovery” continues.

According to new data from CoreLogic, the median house value in May climbed by 3.5 per cent to reach a record $1.186 million. Since the start of the year, it has grown by 15.1 per cent – that’s $34,200 a month or $8550 a week. Among major cities, only Vancouver in Canada has seen house prices climb faster.

But wage rises can’t compete with property. And stagnating wages are where the danger lies.

While prices are high and loans are cheap, how long can people support the boom?  Particularly when foreign buyers are locked out by the pandemic.

What you can do right now

 

Ready to buy? 

Tonya Davidson, a buyer’s agent with more than 30 years of Real Estate experience tells the ABC  to set your own price limit outside of negotiations, learn your rights against pushy real estate agent tactics, get a copy of sale contract examined by a licensed conveyancer or solicitor and make sure you put your offer in writing.

Can’t afford property in the area you want? 

Lloyd Edge, director of buyers agency Aus Property Professionals, says to look into reinvesting. This practice essentially involves buyers purchasing investment properties in affordable areas, while continuing to rent in the area they actually want to live. This allows younger buyers to get started in the property market earlier, without having to sacrifice their current living situation or spend the time searching for a house they would definitely want to live in.

Totally priced out of the housing market? 

Independent financial adviser Jacie Taylor tells ABC that if you are priced out of the market, it’s time to start building your wealth in other ways. She recommends avoiding the share market and sticking to diversified index tracking of ETFs. Three to five years of investing can then put you in a position to enter the property market.

 

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