Anchor (Oscar & Eliza) : Australia' Housing Market might start to slow to around 4% this
year and now that's according to the Global Housing and Mortgage Outlook report.
It still lists Australian home as the third most expensive of 22 countries surveyed.
Here with us now is Ben Kingsley, the Chief Executive of Empower Wealth from Melbourne.
Ben, good morning.
Ben: Good Morning
Eliza: What is your take on the property market for 2015 in Australia?
Ben: Yeah, Eliza, what we got to realise is the property market in Australia is made up
of sub-markets.
It is such a large population base where we are growing, the population is growing.
The economy is softening but we got to look at different markets, they are in different
cycles.
So, when we look at Sydney, we do believe that the pace of growth is going to slow,
so there would be more growth in that particular market.
But what we are actually seeing is really good signs around planning approvals.
Those planning approvals are going to mean that there is going to be more stock that
comes onto the market.
From a supply and demand point of view, we are going to see that supply kick in and from
the demand side, we are actually seeing immigration slowing.
So population growth is slowing.
So we believe that combining potentially a slowing general economy, is going to soften
the demand for property and we will those price start to slow down.
Certainly in Melbourne and Sydney.
On the other side, we've got Brisbane, which is a market place that is still in its upward
cycle so we suspect that Brisbane is going to do quite well in 2015.
Oscar: Now, you talked about the supply side of things and in your city, Melbourne, I think
it is well known that apartment buildings are popping up every second day it seems particularly
because of those investors from both overseas and locally.
Now, will we see the price drop as a result of this supply?
I mean, you said that it will turn towards that but we have seen prices go up in spite
of these buildings popping up.
Ben: Yeah, but its early days.
We are talking about upwards of 200,000 planning approvals.
Now, we've never seen those sorts of numbers.
What usually happens in this type of cycles in Melbourne, Sydney and Brisbane alike is
that we start to see confidence around building because we are seeing sentiments around property
quite strong.
We are seeing investors coming into the market.
So there is this lag effect where this building takes place in late 2015 and it become occupied
in 2016.
That is why we see with low interest rates at the moment, we are actually going to see
property prices continue to grow but I suspect some of that gain will be given back in 2016
when interest rates start to rise.
Eliza: Ok, so let's look at it from the perspective of sellers and buyers.
I suppose, first the buyers, if you are out in this market, how should you approach it?
Ben: Look, very cautiously in 2015.
We don't want to have the herd mentality and think that we are going to miss out so we
pay a premium to pay to get into a property, whether we are buying for owner occupied purposes
or even for investment purposes.
There is going to be a big supply of units that are going to come into the market but
certainly at those inner city areas and fully developed areas where housing stocks are at
a shortage, there will still be a really strong demand.
So be sensible from an owner occupied point of view, take a long term view.
Say to yourself that this is something that we are going to need to afford today and certainly
tomorrow.
And when we are talking about green fields and new estates, there is an excitement in
that particular market place.
So we want to say to people, be cautious out there, do your research, make sure that you
understand the supply that is coming along because if it is going to be oversupply then
technically, we are going to see flat values in those marketplaces in 2016 and 2017.
Oscar: Now, Ben Kingsley, you mentioned interest rates there and as we know, 3 of the 4 major
banks are predicting that the current record low cash rate of 2.5% is probably going to
go down even further.
Won't that mean a rising prices as more people get into the market and more people take on
mortgages?
Ben: It's a great question Oscar and I think the important point here is that is not necessarily
going to be the case because what the Finch Rating Report also talked about was what we
called an affordability ceiling and that is a measure of household incomes with the ability
to be able to borrow.
So if the cash rate actually comes down and interest rate goes lower, the lenders aren't
actually adjusting their assessment rates which means that borrowers can't borrow more.
So we are actually going to hit an affordability ceiling which means that it won't necessarily
put pressure on house prices.
But in saying that, APRA and the Board has got a real responsibility in making sure that
we don't see the pricing of house prices going too far because that could be going into a
housing bubble realm and we don't want that at all.
Eliza: On the housing bubble point, are there pockets and we see particularly in Sydney,
the market is really coming back very strongly.
Are you at all concern about that?
Ben: Not yet.
I don't think we are at that stage.
You know, the banks do stress testing on their mortgage books all the time and arrears rates
are around 1% - 1.5%, at historical low level.
So I don't see any challenges there but I certainly wouldn't want to see double digit
growth in the Sydney property market in 2015.
I suspect we are going to see that single digit growth rate and I think we will see
that in Melbourne.
I do suspect double growth rates in Brisbane and I suspect also, Adelaide is going to have
an interesting time and Perth, unfortunately, with the mining boom, it is probably going
to be stagnant.
Canberra is also going to be another market that I think is going to be quite soft.
Oscar: Ok, Ben Kingsley, we will have to leave it there but thank you again for your insights.
Ben: Thank you very much.