Is the rise in house prices sustainable

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The property market appears to have bounced back with a vengeance, with property prices rising for the fourth straight month in the two biggest housing markets – Sydney and Melbourne.Prices  have risen by over 5% since the end of May in both cities and while the headline rate could be alternatively good or bad news depending on where you are currently placed in the property market, it is worth looking a little closer at the market as a whole before jumping to conclusions.

Undoubtedly, the various stimulus packages put together by the Federal government have had some impact on the market.  Whether first home buyers have entered the market or investors have moved in anticipation of first home buyers entering the market, the impact has been seemingly significant. In fact, there are some analysts who would argue that the impact has been too great and the resultant price rises could effectively freeze the very people that the government was trying to help out of the market.

The other factor that analysts are pointing to is that the apparent price rises may reflect a fall in the number of properties being available for sale – causing more competition for available properties which may have resulted in higher prices in the short term. They caution that as more properties come into the market that prices may adjust accordingly.

Finally the factor that must be taken into account is housing affordability. Despite record low interest rates, a combination of rising house prices and stagnant wage growth is pushing the housing affordability index higher and higher.

When you take these three factors into account,there is a possibility that  the recent price rises may be more of a correction than a trend.

If you are considering entering or reentering the property market and would like assistance with finance do not hesitate to contact Australian Finance Hub to discuss your particular circumstances an options.

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