How Long Will the Housing Boom Last?
As the industry faced record low interest rates, low listing stock and government initiatives for first home buyers, the property market has been booming for the last few months. This prompted many people to get into the market, and economists forecasted a 30 per cent property value growth. How is this prediction holding up with the current market trends?
The Reserve Bank of Australia slashed the cash rate to the record low of 0.1 per cent in November last year, which prompted lenders to decrease interest rates on mortgage loans. With mortgage loans being under 2 per cent, this meant some people could afford to buy their first home, and others could refinance for a better rate. In this blog, we talked about how Queensland benefited the most from the buyer demand and how it affected the property prices.
The research by the Reserve Bank of Australia in 2019 found that a permanent one percentage point cut in the cash rate would cause a 30 per cent house price increase within three years. In their July 2021 board meeting, RBA held the cash rate at 0.1 per cent, which they intend to keep until 2024. While there is an increasing pressure on RBA to increase the cash rate, they reiterated they won’t consider doing it until the inflation reaches 2-3 per cent.
If interest rates and inflation remain low for the next three years, the house prices are likely to grow by 25 per cent. However, dwelling prices are already up by 13.5 per cent over the past year. In this blog, we outlined which areas in Southeast Queensland have experienced soaring demand and price growth.
What’s next? While the properties are growing in value, it may take longer for people to save for the deposit. In Brisbane, it currently takes around four years and six months to save for a house and three years and four months for an apartment on average. Check out this link for useful tips that will help you save for a deposit.
Whether you’re thinking of buying or selling in the near future, it is always a great idea to know where you currently stand financially.