Price rises starting to ease: ANZ

Sales prices are starting to follow the downward trend of residential property turnover, ANZ’s economists say.

Monday, June 30th 2014, 12:00AM

by The Landlord

They have released their latest Property Focus, in which they say that the volume of house sales is trending down – “and now selling prices are also starting to succumb”.

They say the market has been buoyed by rising net immigration, an improving labour market backdrop and low inventory levels.

“But times are a-changing, not least with a turnaround in interest rates but there are also the first signs that the labour market may be cooling. The further removal of interest rate stimulus has been widely flagged.”

The report uses ten gauges to predict the future direction of house prices: Affordability, serviceability, interest rates, migration, supply-demand, consents and house sales, liquidity, globalisation, housing supply and median rent.

Of those, only migration is pointing purely up.

Mortgage repayments as a proportion of income are at a four-year high, approaching the 50% level, interest rates are going up, the gap between demand and supply is continuing to widen, there is a disconnect between consents and house sales, and inventory is low by historical standards, the report says.

Overall, the report says rising interest rates are the dominant theme.

The economists said two-year rates such as ANZ’s special at 5.85% were hard for borrowers to look past.

They said there was little merit in fixing for a longer term. “It’s not because we don’t see rates rising in time but more because the two-year rate is so special that the savings that one can make now are likely to more than offset any rate shock coming in two years’ time.”

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