Hunter housing market outlook

Interest rates stall residential upturn

Monday, 26 July 2010
MEDIA RELEASE

Comment: Simon Deeming, HVRF Research Fellow
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Interest rate rises stall residential market upturn
The Reserve Bank’s shift of interest rates to ‘neutral’ levels has led to a return of poor housing affordability and put the brakes on the upturn in the Hunter Region’s residential housing market, according to the HVRF’s second Hunter Region Residential Market Outlook (HRRMO).

The Foundation initiated the HRRMO in 2009. It will be published annually and provide a valuable resource for anyone wanting to keep track of trends in the Hunter’s residential property market. HVRF Research Fellow Simon Deeming said house prices across the Region rose significantly in the 12 months to March 2010 and sales volumes were also strong.

“The momentum in the wider market evidently flowed into new residential development activity, producing strong vacant lot sales and triggering developers and house builders to pursue new dwelling approvals,” he said. “How forward orders for construction fare remains uncertain given the withdrawal of affordable housing stimulus, the reduction in first home buyer grants, weaker purchaser sentiment and the renewal of poor affordability levels. However, not all the data is negatives with recent trends in housing finance suggesting that demand may prove somewhat resilient.”

HRRMO indicates trends in a number of key Hunter Region data including house prices, number of sales, rental prices and number of bonds, vacant lot sales, housing approvals, interest rates and home buyer sentiment.
Key findings from the first edition include:

  • Median house prices rose by 12.7% in the 12 months to March across the Hunter Region, consistent with trends across the Central Coast (+12%) and Greater Sydney (+15.6%) respectively
  • Rental growth for three-bedroom houses was 7.3% per annum in March, with pressure for stronger increases due to limited new supply
  • The HVRF First Home Buyer Affordability Index has returned to a high level, implying poor affordability, driven largely by the return of interest rates to ‘neutral’ levels. This context is unlikely to sustain cyclical upturn in the residential market or residential construction activity.

Download the latest HRRMO

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