Property and finance blog

Most will agree the residential real estate market will experience a sustained level of flatline for some time. What is interesting to note however is the predicted rise in rental rates.

The following article is  a piece taken from the latest Westpac property market forecasting. We have stated for some time now that long term property investors will prosper if they can manage to hold onto their property. Rising rental rates - have to happen.

They have certainly have not kept up with property capital growth rates and thus landlords have been wearing it hard - where tenants have been getting a great deal! Hopefully this report will give residential landlords, in particular, the confidence to start moving their rents to a more realistic level. Perhaps buying property over the next few years in a rising rental environment is a  good idea?

More good news

More good news for first home buyers and second home investors priced out of the market.

“Houses are now grossly over valued, but the strong economy and relative shortage of housing supply will prevent significant price declines,” according to Westpac.

The number of house sales has collapsed by a third back to 2003 levels, an early warning sign. Westpac claims monthly house price inflation has “screeched to a halt” since April after rising about $8000 a month.

Reserve Bank interest rate rises of the past 18 months have finally taken effect after a delay due to the fact so many home buyers had taken up fixed rate mortgages, usually for a two or three year term.

With rental yields at 4 per cent and mortgages at 9 per cent the residential property sector is less attractive and Westpac predicts even higher real mortgage rates for many home owners. On the positive side, banks have been relatively conservative lenders, according to Westpac, there is little evidence of an overhang of housing stock.

Investors may be in for a better time with rent increases forecast at 6 per cent a year, although it will take five years to reach equilibrium with house prices.

Housing affordability (defined as 25 per cent of disposable income servicing an 80 per cent mortgage) will eventually sewing back in favour of home buyers but not for about eight years as incomes catch up and prices stagnate.

This article courtesy of PropertyTalk