An international report has ranked Australian property as severely unaffordable. The 10th Annual Demographia International Housing Affordability Survey has placed Sydney in fourth spot, behind Hong Kong, Vancouver and San Francisco. Australia’s second largest city Melbourne has been named the sixth least affordable from housing markets across 360 metropolitan markets in the US, Canada, UK, Ireland, Hong Kong, Singapore and New Zealand.
Top Ten Least Affordable Major Markets:
1. Hong Kong
2. Vancouver
3. San Francisco
4. Sydney
5. San Jose
6. Melbourne
7. Auckland
8. San Diego
9. Los Angeles
10. London
From all the markets surveyed Australia scored the highest rating in the severely unaffordable category with 25 severely unaffordable markets, followed by the US with 23 and the UK with 15. Demographia says each of Australia’s major markets has been severely unaffordable for all 10 years on the survey.
In the wake of the severely unaffordable ranking a global ratings agency has warned Australian house prices are at risk of outstripping income growth. Fitch’s Mortgage and Housing Outlook notes, “Relative to rents, house prices in a number of countries are significantly above 1997 levels”, especially in Belgium, France, the UK, Australia, and Canada where the ratio is above 170 per cent of 1997 levels.
Fitch says all of these countries also feature high house price to income/GDP ratios and therefore the upside potential for home prices is limited over the next decade. The report has predicted Australian property prices will grow 4 per cent this year, under half the 9.8 per cent gain recorded last year according to RP Data.
As property prices continue to head higher new data has shown Australian mortgage demand climbed to a four-year high at the end of 2013 on the back of record low interest rates. Veda Group Limited
(ASX:VED) has reported older Australians led the boom which saw mortgage demand jump at an annual pace of 15.3 per cent in the fourth-quarter of 2013, compared to a pace of 9.3 per cent in the prior quarter. The credit bureau noted, “A further shift to mortgage applications from older demographics, with more first home buyers leaving the market.”
The figures come as international recruitment company Hays claimed demand for mortgage brokers is growing across Australia. The Hays Quarterly Hotspots reports said, “Mortgage Brokers continue to be sought after due to demand from investors and first home buyers”.
Commentary
Commonwealth Bank of Australia’s
(ASX:CBA) broking arm Commsec Economist, Savanth Sebastian provides a property price forecast for the year ahead:
“We expect property prices to virtually go sideways, maybe 5-7 per cent growth. Really, much more moderate growth that we saw in 2013. And I think the Reserve Bank would like a slower growth story. They don’t want to see a property bubble taking place. The one area that probably we need to watch is with the falling Australian dollar the foreign demand for Australian properly may cause a bit of a concern in terms of raising property prices. But, I think the Reserve Bank may combat that towards the end of this year by raising interest rates.”
Commercial property sector
Property investor Growthpoint Properties Australia Limited
(ASX:GOZ) property portfolio update has forecast the year ahead will be a better year for office market leasing activity than 2013.
Property developer Watpac Limited
(ASX:WTP) has scored an $83 million contract to build a nuclear medicine facility in New South Wales for the Australian Nuclear Science and Technology Organisation.
Property investor GPT Group
(ASX:GPT) has forecast an annual earnings lift and decided to reactivate its share buyback after abandoning a proposed takeover for Commonwealth Property Office Fund
(ASX:CPA).
Real estate company Desane Group Holdings Limited
(ASX:DGH) says its assets continue to perform well and it has forecast its interim profit will jump between 80 and 100 per cent.
