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Fitch Flags More First-Home Buyer Strife

22 January 2014
Ratings agency Fitch has flagged further housing affordability pressure as record low interest rates and below-average supply continue to fuel Australia’s booming property market in 2014, albeit at a slower pace than last year.

In its Global Housing and Mortgage Outlook report, Fitch predicted house prices would rise up to four per cent nationally over the coming year, compared to a 9.8 per cent rise in capital city house prices in the 12 months to December 2013.

The agency flagged increasing difficulty for first-home buyers entering the market as a result of the rising prices and the scrapping of the first home owner grant in South Australia as of January 1.

In September, first home buyers fell to a low of 12.5 per cent of all owner-occupied properties purchased.

Australia is the second most expensive major economy in which to buy a house, according to the report, lagging only the United Kingdom in terms of average house price to income ratio, at 8.3 times.

However, when comparing house prices to per capita GDP, Australia was the second most favourable nation.

The agency also said while dwelling prices nationally appeared expensive, affordability had actually “improved substantially” as a result of record low interest rates.

House prices grew 14.5 per cent in Sydney, 9.9 per cent in Perth, and 8.9 per cent in Melbourne in 2013.

Fitch expected growth in house prices in Brisbane and Adelaide – which saw comparatively subdued growth throughout 2013 – to also pick up 2014.

The agency said in addition to the Reserve Bank of Australia’s (RBA) prolonged rate-cutting cycle, changes to self-managed superannuation fund (SMSF) legislation allowing funds to more easily borrow against property, plus increased interest from overseas buyers, had helped drive prices up.
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