Domain: House Prices Will Go Nowhere In 2015

The prospects for Australian housing markets are looking generally subdued for 2015.

While the peak of the current growth cycle was the December quarter 2013, growth levels have now moderated. Most capitals recorded falling quarterly trends as buyer activity slowed given the impact of the lowest interest rates in 60 years.

“Historically low interest rates have activated housing markets over the past two years,” senior economist Dr Andrew Wilson from the Domain Group said.

“2012 was a year of recovery with rising prices, 2013 a year of expansion with strong prices growth, 2014 was a year of moderation, and 2015 is set be a year of flat activity with most markets struggling to hold the inflationary line.”

While interest rates have remained at the current 60-year low of 2.5% for 16 consecutive months – the longest steady sequence since 1997/98 – concerns over the performance of the national economy, particularly in regards to the jobs market, could mean more cuts to interest rates by mid-2015.

According to Domain, house price growth for most capitals is likely to be modest at best in 2015, but results will be dependent on local supply and demand factors rather than low and falling interest rates, which has driven markets over the past two years.

This year Sydney was the clear leader of the capitals for house price performance with the rate of growth declining over the year to finish well below the rates recorded at the end of 2013. Sydney will continue to be the best performer in 2015 with growth likely to be at least twice the inflation rate.

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