Australian property prices expected to rise in 2014

Australian property prices are expected to continue rising in 2014 as affordability falls.

Affordability dipped in December 2013, according to the Housing Industry Association thanks to positive impact from previous interest rate cuts tapering off.

“Those in the housing market or who have been on its cusp of and then entered in recent years have experienced a considerable improvement in affordability. This improvement has been driven by an easing interest rate cycle which now Sees borrowing costs at or near record lows,” commented HIA Chief Economist, Harley Dale.

“The HIA-Commonwealth Bank Housing Affordability Index eased by 0.5 per cent in the December 2013 quarter as the impact from the last rate cut in August 2013 largely washed through the system. The Index was nevertheless still at a level 8.4 per cent higher than what was observed in the December 2012 quarter.”

“In 2014 we are likely to see further gains in residential property prices, but in an environment of subdued household earnings growth and steady interest rates. The strong cyclical improvement to affordability for existing participants in the home ownership market has therefore run its course.”