Affordability to curb Sydney, Melbourne growth: RP Data

Affordability constraints will start to impact on value growth in Sydney and Melbourne as a proportion of potential buyers continue to be squeezed out of the market as values move higher, according to RP Data forecast.

RP Data also believes that from an investor’s perspective the best opportunity to enter the Sydney, Melbourne or Perth markets has likely passed. Some other key observations include:

• Much of the growth over the year has occurred in Sydney and Melbourne and this appears to be continuing with evidence of a mild pick-up in value growth in Brisbane. Subsequent purchasers and investors are the main drivers of the market currently spurred by the low mortgage rate environment.
• Although all price segments of the combined capital city market are shifting higher we are seeing the greatest strength in the premium segment and comparatively weaker growth across the more affordable segment. We believe that home values will continue to increase over the remainder of 2014, albeit at a more moderate pace.

At a global level RP Data is forecasting some challenges. These include:

• The US economy appears to be picking up and the Chinese economy appears to be experiencing a soft landing in terms of its moderation in economic growth however, there are currently a number of concerns around the Chinese housing market with prices now falling. Even the Eurozone’s prospects appear to be improving.
• The high level of investment activity is a further potential pitfall for the market. If value growth slows or potentially falls there is a risk that many of these investors could look to exit the market at the same time, potentially creating downwards pressure on home values. The impact of such an occurrence would be largely focused within inner-city unit markets where the concentration of investor owned homes is highest, particularly within the unit market.