Despite the global pandemic impacting the property market, RBA reports property prices are set to increase by 30% over a 3-year period and auction clearance rates at record highs. All a sign of the market’s revival and an opportunity to invest.
Westpac predicts a 20% jump in property prices over two years which correlates with a $200,000 increase on the value of Sydney homes. Not only, the significant cuts to official interest rates by 1.15 percentage points since June (current cash rate is 0.1%) has surged investor confidence where they are taking on less debt and has driven up real house prices.
According to Core Logic, Auction clearance rates in Sydney sit at 87%, and weighted average of 83% in Australia. This confirms the rise in demand for property, a sign of greater investor confidence, supported by low interest rates, ample credit supply and improving economic outlook.
Unlike previous housing booms, the market is currently being fuelled the ‘fear of missing out’ on strong capital growth. Economist Saul Eslake told SMH the gains in the housing boom are unlikely to be reverted, as demand is arriving from first time buyers who have less competition from cashed up immigrants due to international borders closed.
Beneficial outcomes for investors are occurring as constant returns through rental yields of investment properties are set to increase, consequent of the rising housing prices and capital growth.
However, RBA and APRA are cautious of the low interest rates and are willing to tighten lending standards if they leave new home buyers in negative equity or taking on unpayable levels of debt.