Homeowners enjoyed another good year in 2014, with home prices rising on average almost $11,000 across the eight capital cities.
In 2014, residential property prices rose 6.8 per cent, which was a little weaker than the 10 per cent rise in 2013 but still stronger than the three per cent rise in 2012, data from the Australian Bureau of Statistics showed on Tuesday.
Sydney was again the standout performer with home prices up 12.2 per cent in 2014, almost matching the 14.8 per cent rise in 2013, the only capital city to register double digit rises in the last two calendar years.
Perth and Darwin had the weakest outcomes last year. HIA senior economist Shane Garrett is confident that home prices growth will be sustained.
“This is exactly the kind of home price growth that prevails over the long term. Australian home price growth is now striking the right balance,” he said.
Mr Garrett said the increase in the number of new homes being built is putting a lid on home prices.
“This has been a vital factor in assisting housing affordability, as well as providing crucial support for demand in the domestic economy,” he said.
“We need to ensure that new home building is allowed to make a full contribution to improving affordability and living standards in the economy.”
However, HSBC chief economist Paul Bloxham warns that falling interest rates might push prices up too quickly, forcing potential buyers out of the market.
“Construction of new housing is welcome, but further housing price gains may present challenges,” he said.
“Recent cuts in mortgage rates to new all-time lows increase the risk of the housing market over-inflating.
Last week, the Reserve Bank cut the cash rate to a new record low of 2.25 per cent and all four major banks passed the cuts on in full. More reductions by the RBA are expected as it tries to boost an economy that has been hurt by falling commodity prices.
HSBC is expecting national home prices to rise seven to eight per cent in 2015 and nine to 10 per cent in Sydney.
“When rates do eventually rise, there is now a high risk that Sydney will see price falls,” Mr Bloxham said.
CAPITAL CITY HOUSE PRICES IN 2014:
- Sydney – rose 12.2%
- Brisbane – rose 5.3%
- Melbourne – rose 4.5%
- Adelaide – rose 2.5%
- Hobart – rose 2.2%
- Canberra – rose 1.7%
- Perth – rose 1.2%
- Darwin – rose 0.8%