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GUEST OBSERVER
After a surge in growth of 15% and 12% respectively over the last year in the property markets of Australia’s largest cities, Sydney and Melbourne, I believe both are headed for a welcome cooling off period in 2016.
Property prices actually slipped in five of the eight Australian capital cities during November, according to CoreLogic RP Data, and there are signs this trend may continue despite the Reserve Bank again holding the cash rate at its current low level in December.
There will be hot spots in the market – particularly inner-city suburbs – where demand will continue to outstrip supply.
Many expect that rates will continue to be at their historic low levels well into 2016, as there will be continuing uncertainty in global markets, combined with a weaker Australian dollar, subdued GDP growth and patchy consumer and business confidence.
Next year should provide buyers with a bit more breathing space to relax and take their time choosing the best house or apartment for their needs and aspirations, following the recent auction frenzy which saw prices rocket in the eastern states’ capital cities.
Research* shows that outside of interest rates, the flexibility to make overpayments and ability to use a redraw and/or an offset account are the most important factors in choosing the right home loan, which is reflective of the current low rate environment as people try to get ahead on their mortgage repayments while rates are low.
While 2016 will continue to feature global uncertainty and slow economic growth, green shoots are appearing in the non-mining sector. When combined with improving unemployment levels, continuing foreign investment and low interest rates, the housing market should remain in a healthy state.
* The RFi Australian Mortgage Council Broker Insights report was conducted online in September 2015. In total, 2,036 mortgage holders took part and they were nationally representative of the mortgage market by Age, Gender and State/ Territory.
The sample consisted of:
2,036 people with a mortgage (Property owners)
1,571 people who took out their most recent mortgage on their home (Homeowners)
465 people who took out their most recent mortgage for their investment property(ies) (Investment property owners).
John Symond is executive chairman of <a href="https://www.aussie.com.au" target="_blank">Aussie Home Loans</a>.
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The year ahead should see a healthy property market: John Symond

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The residential housing market has seen strong growth over the last year, with combined capital city home values now 7.9% than they were a year ago.
While home values are broadly climbing across the combined capital cities, growth has been fuelled by a large rise in values across only a handful of cities, with Sydney leading the way with 12 per cent growth, while Melbourne and Perth rose 6.5 per cent.
Housing is at its most affordable level in a decade, despite the recent rises in home prices, according to the November Housing Industry Association-Commonwealth Bank housing affordability index, which tracks the relationship between household income, mortgage costs and home prices.
Major factors behind the growth in affordability has been this year’s historic low interest rates and growth in wages.
Sydney’s housing market experienced a spring revival, which has seen prices climb steeply as buyers compete for homes and caused the city to post just a 0.5 per cent improvement in the index, compared with Melbourne at 2.6 per cent growth.
The Reserve Bank’s rate cuts since 2011 have seen variable interest rates for mortgages fall from about 7 per cent to around 5 per cent.
However the drop in rates has not attracted first home buyers, who made up just 12.5 per cent of all loans written in September.
The drop in the first home buyers indicates what I believe will be a growing trend throughout 2014, when investors will continue their domination of property purchases.
This is a long term fundamental shift in the property market, where in many areas first home buyers have simply given up on what has been a long held tradition in Australia – getting started with a small house or an apartment in the suburbs.
First home buyers simply can no longer compete against investors in many hot property pockets of most capital cities, preferring to invest in shares and rent in apartments nearer their workplaces or CBD’s.
Many of the new homes being built are longer distances from the city where there is little infrastructure and a long drive to work or attractions for young people.
This problem needs to be addressed by governments at all levels as the economy needs first home buyers, with the key benefits being they are forced to save for a deposit or pay-off a mortgage, while also stimulating the building industry.
The Federal Government should look at creating tax incentives for first home buyers to save for a deposit, while more affordable new housing should be constructed to accommodate them.
There is currently a boom on mortgage lending, with Aussie posting record figures for October and November, and there is little sign of a drop-off in the new year, following what will be a strong Christmas retail season.
Low rates, which should remain at their current lows for most 2014, will continue to fuel the strong growth in lending.
First home buyers will continue to face challenges to get into the market in this climate and they should avoid the temptation of going after very low deposit loans, as they can lead to dramas with a job loss.
Meanwhile I see more people seeking to address their personal debts, with the big repayments of credit cards and personal loans being made during 2013 expected to continue in the new year.
For those home and apartment owners seeking certainty around their mortgage repayments, I suggest it would be a good time to fix their rates – which have now started to edge higher and will continue to do so in 2014.
2014 will have its challenges for consumers and businesses but I believe better times are ahead of economic confidence improves both in Australia and overseas.
John Symond is the executive chairman of Aussie Home Loans.
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Aussie John's market outlook for 2014 

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There’s never been a better time to buy property.
The Reserve Bank of Australia’s decision to cut rates by 0.25% today should help business and consumer confidence, but makes buying a property a very attractive proposition.
The larger than expected deficit coupled with a slow recovery overseas has meant the RBA needed to cut rates to encourage consumer confidence, and this cut coupled with already low rates and low property prices, should positively impact people’s ability to get into the property market or even consider an investment property.
This, coupled with government incentives to boost the building industry and stimulate the property sector, means that there’s also a great opportunity to consider a house and land package.
It’s good to see property prices gradually moving upwards, but house prices are near the bottom, and it’s still a buyer’s market.
It is worth talking to a mortgage broker like Aussie to see what savings you could make and what grants you are entitled to, because this rare combination of positive elements will not be aligned forever.
There may be another cut in coming months and a few economists are predicting the coming year to bring our lowest rates ever. Either way I am confident low rates will be enjoyed for a bit longer, and those ready to purchase have some excellent opportunities to do it now.
John Symond is the <a href="https://www.aussie.com.au/" target="_blank">Aussie</a> executive chairman and founder.
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John Symond

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