Recent interest rate reductions have not been drastic enough to allow significant house price growth – or worse, inflate a housing market bubble, claims Residex founder John Edwards.
Edwards said that affordability is keeping the industry in check, because a lot of families are likely to still think they are better off renting.
Residex figures show the amount of money that a family has leftover to spend after monthly loan repayments are paid ranges between $880 (Sydney) and $1,457 (ACT). Disposable income after rent is paid ranges from $1,057 (Hobart) and $1,537 (ACT).
“I’m sure that most of us with a small family would consider living on $1,000 per month somewhat difficult,” Edwards said. “When looking at the table in this light, the median family buying the median home is very constrained by affordability… they’re better off renting.”
Edwards said that the realisation that renting is a better option will take hold, but the lack of security of tenure will be influencing many people and causing them to accept the more difficult option.
“Ownership of house and land assets is going to become less prevalent and ownership of units will become more of the norm in time. Additionally, renting will become more prevalent in city areas,” he said.
Edwards added that if demand can be expected to be limited due to affordability, there will also be a limit on the rate of capital growth.
“Given the view that interest rates are unlikely to fall much further and house prices probably won’t fall in value by any significant amount, properties that are most likely to see growth are those located in areas with better affordability.”
Can you afford to buy in this suburb? Find out how much you can borrow
Top Suburbs :
Get help with your investment property
Do you need help finding the right loan for your investment?
When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.
Just fill in a few details below and we'll then arrange for a local Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus and appointment is free.
We value your privacy and treat all your information seriously - you can check out