Widespread concern that the high growth in Australian dwelling values is not sustainable in the long-term is evident in the results of a new survey.
The January RP Data – Nine Rewards housing market sentiment survey found that nearly two thirds (60%) of participants think the housing market is vulnerable to a significant correction in dwelling values.
However, 76% of participants think it is a good time to buy property and half (50%) think that dwelling values are likely to rise over the next six months.
RP Data national research director Tim Lawless said the survey showed Australians remain positive about the direction of dwelling values, but have fairly measured expectations of value growth.
The high level of concern about a market correction highlighted the underlying concern amongst consumers about the sustainability of the growth in Australian dwelling values.
Lawless said the fact that transaction numbers continue to rise and auction clearance rates remain at near record highs suggests market demand remains high, despite concerns.
“Ongoing debate about a housing market bubble is clearly an issue that has the potential to dampen housing market sentiment - particularly in markets such as Sydney and Melbourne where home values tend to be higher.”
The survey also showed that, over the last year, there has been a significant improvement in views on the selling environment: 52% of survey participants think it is a good time to sell - compared to 33% at the same time last year.
A further interesting finding is that nearly half (49%) of survey participants think their personal financial situation is the most important factor to consider when purchasing a property.
Prospects for capital growth is the most important purchasing consideration for 20% of participants. This indicates that many housing market participants are seeking to build their wealth via property.
Meanwhile, RP Data Rismark will be releasing the February Home Value Indices results this coming Monday (March 3).
The results are likely to show there has been a marked change in the level of capital gain across Australia’s largest capital cities over the first 26 days of February.
Over the month to date, the daily index showed dwelling values across the five city index were down 0.3%, with Sydney the only city to register a capital gain.
Lawless said it remains to be seen whether the slowdown in the pace of growth simply reflects an adjustment from the very strong January result or is the start of a slower trend.
During February auction clearance rates remained strong, while mortgage activity across RP Data’s valuation platforms was close to record highs which suggests market demand remains strong, he said.
“On the other hand, yields have continued to compress as dwelling values outpace rental growth and affordability constraints are likely to start slowing the larger capital city markets. “
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