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House Prices to Rise!

12 March 2010

House prices to rise says economist- but they`re still cheap says analyst!

Recent comments from a leading economist-and another from one of Australia’s top property analytical services make interesting reading.

Economist, Matthew Bell of Australian Property Monitors says the outlook for property prices remains strong, despite three interest rate rises and the prospect of further increases this year.

He said median house prices across Australia have grown at their fastest annual rate in five years and that because mortgage rates were relatively low moderate price growth could be expected this year.
Property values rose by an average of almost 5% in the final three months of last year and by 12% over 2009.

He said he thought It would be a while before mortgage rates rose to 7-8%. If interest rates do reach this figure demand will slow.

Meanwhile, Australian housing is not as expensive in relation to average income as is commonly believed says Rismark International.

The real estate analytical organization has developed a new housing affordability index which compares Australia dwelling prices with the Reserve Bank’s definition of national “disposable household incomes” overtime.

The quarterly Rismark National Dwelling Price-to-Income Index, as it is known, revealed that Australia house prices have not risen relative to disposable household incomes since late 2003.

Christopher Joye, Managing Director of Rismark International, said the fact that there has been no discernible increase in Australian house prices relative to disposable income since the end of the last boom in 2003, is one important explanation for the exceptionally resilient performance of Australia’s housing market during GFC.

“In contrast to claims that Australian house prices are 7-8 times incomes, Rismark’s National Dwelling Price-to-Income Index implies that the true ratio across all regions and all property types is around half the estimate.

“This suggests that Australian housing is not as expensive as is commonly believed. “It also reconciles with RBA analysis highlighting Australia’s internationally low mortgage default and mortgage stress rates,” Mr Joye said.

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