The House Price Boom: Where Are We Going?

House prices have been steadily growing for a while now, but surely this can’t keep going forever. All markets progress in cycles, and real estate is no different, so where are the experts saying we’ll go from here?

Ups and Downs
As RMIT property economics professor Chris Eves recently said to the ABC, prices naturally rise and fall, but it might not affect everyone the same way.

"There is potential that there won't be much market demand ... which could lead house prices to fall, but it's not going to be across the board," said Mr Eves.

Prices in Sydney, for example, have grown by 67% between June 2012 and December 2016, while the national interest rate has dropped from 4.75% in September 2011 to 1.5% currently, a record low. This has all the hallmarks of a property bubble, and when prices naturally roll back, this can leave buyers in this region with a property worth a lot less than they paid.

However, with steadier growth in regional areas, the rollback may not be as severe, allowing for buyers in these regions to emerge in a relatively stronger position.

Why Does This Happen?
As Mr Eves noted, property prices are directly related to what people are willing and able to pay. However, once the price reaches a point where the market will no longer support it, it can start to move back down to meet demand.

To once again look at Sydney, which has experienced a 15.5% growth in city prices in the past year, property data analysts CoreLogic found average households here were spending 44.5% of their income on mortgage. It’s hard to say whether this will be a deciding factor in rolling back prices, but it’s easy to see how having repayments as such a large part of all income could lead potential buyers to hold off until the market stabilises.

What Can You Do?
Though it’s impossible (or at least very unlikely) to correctly predict where and when a market will fall, you can still look at the factors to make the best decision at the time. For example, with a great deal of development currently happening in the CBDs of Sydney, Melbourne and Brisbane, it’s more likely to have an oversupply and see falling prices in the near future.
It's also important to remember the property cycle and, as with any market, prices will rise and fall. No matter what happens, you can always get in touch with LJ Hooker Sunnybank Hills to make sure you get the best from your situation.

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