Australia’s 4 Biggest Housing Risks, Reserve Bank Reveals

The New Daily reported four of Australia’s biggest housing risks, which were listed by the Reserve Bank. These risks were rampant price growth, a looming apartment glut, low rents, and a landlord resurgence. The dire warning came after the RBA decided not to change the nation’s official cash rate at a record low of 1.5%. The move was widely anticipated by various markets and industry observers.

According to Business Insider, the Reserve Bank of Australia gave no indication of a future interest rate hike when it released its most recent monetary policy statement. It also explained that its Board firmly believed that the move to keep the rate unchanged is aligned with their goals of achieving sustainable growth and inflation targets. The central bank added that the country’s economic growth rate would still hit 3% over the coming years. The expected economic expansion was based on forecasts of a boost in resource export increase and the minimal effects of a declining mining and non-mining investments.

Some observers argued that a rate cut could have aided in kickstarting the economy especially since the central bank failed to reach its growth rate target of 2%-3% over the last three years. So one would be compelled to ask why did the RBA choose to keep the rate on its current level? A few industry experts addressed this concern and argued that the central bank was prevented from doing so because the property market has not yet cooled off.

To provide more insight regarding today’s property market, the Governor of the Reserve Bank of Australia Philip Lowe had a few things to say. To begin with, Lowe noted the “brisk” increase of prices in some parts of Australia. Although this trend is apparent in certain areas, there are still locations that are seeing a decline in property costs. For instance, Sydney saw its house price grow at 16% based on the figures provided by CoreLogic for Jan. 2016 until Jan. 2017. Melbourne’s property costs grew at 11.8% while Hobart registered 7.8%. Canberra’s house price growth was pegged at 6.7%, Adelaide at 4.8%, and Brisbane at 4.4%. Meanwhile, other locations saw a drop like Darwin and Perth, which were at -0.7% and -3.2%, respectively. On the other hand, other unmentioned capitals had a combined positive price growth rate of 10.7%.

This kind of growth would make it more difficult for first-time buyers to come up with the needed amount to acquire a home in capital cities, which also offer many of the best jobs in the country. CoreLogic added that a two-income household needed to save a hefty amount for the deposit. They would have to be prepared to pay as much as $850,000 or $640,000 in total if they wish to have a home Sydney or Melbourne, respectively.

In 2013, homebuyers just needed to pay $87,000 deposit to qualify for a home loan for a median-priced house located in the metro. These days, a couple working average jobs needs as much as $103,000 to get a loan. Can you imagine the increase? Apart from these, RBA boss Philip Lowe noted the investor resurgence in the market. He explained that after the RBA lowered the interest rates twice in 2016, investors once again began to flock the country’s real estate market in droves. Because of this, investor loans have skyrocketed to almost a record-high at 54.7% in May 2015. Lowe also stressed the possible dangers that the country may face and these include an apartment oversupply and low rental yields.