House prices predicted to jump 30% in three years: RBA

It’s the document that was never meant to see the light of day.

But a Freedom of Information request reveals the Reserve Bank of Australia projects a 30% increase in house prices if interest rates remain low for the next few years.

The internal, not-meant-for-public-viewing analysis by the RBA looks at the impact of low interest rates on asset prices, including property.

The November 2020 document projects that Australian housing prices could increase by 30% after about three years, so long as the official cash rate remains near record low levels (at or below 0.5%).

And that part of the equation looks promising, as the RBA board said they “weren’t expecting to increase the cash rate for at least three years” when they cut it to 0.1% in November.

What does this mean for central Queensland?

The RBA’s predictions are capital city focused, so where will central Queensland fit in?

Rockhampton-based real estate agent Jason Rayner said it’s unlikely the region will see prices climb to the dizzying heights predicted by the RBA.

“With regards to prices, I feel five per cent is probably a sustainable increase per annum,” he said.

“People moving away from capital cities is going to help – there’s going to be a definite impact – however I think 30 per cent is too optimistic for Central Queensland.”

Mr Rayner said while sales volumes in central Queensland had increased by about a third in the last 12 months, there were other factors at play that would keep price growth somewhat contained.

“In capital cities they are very confined,” he said.

 “We still have vast quantities of land that new homes can be built on and while we have that house prices are going to be controlled a bit better.”

Mr Rayner said home loan approvals with major banks were also restricting the pace of sales in the region.

“Instead of the usual 14 days unconditional, they’re getting pushed out to four to six weeks,” he said.

The Capricornian CEO, Dale Grounds said delays were not an issue at the community owned credit union. “We will see most people within 48 hours for a loan interview and we are approving loans subject to valuations within 72 hours,” he said.

What else does this mean for existing property owners?

A lot more than just a potential increase in the value of their property.

The RBA says both households and businesses can expect their borrowing capacity to increase, too.

That’s because low interest rates will lift asset prices (including property), which in turn will boost wealth, household spending and the value of collateral. And as the value of collateral increases, so too will the borrowing capacity of households and businesses, the RBA document states.

How will this impact prospective property owners?

With house prices projected to rise over the coming three years, it begs the question: is now a good time to jump into the property market?

Well, like most things in life, it will depend on your earnings, savings, borrowing capacity, goals, and where you’re at in life right now.

But it’s worth noting that there are a wide variety of generous federal and state government initiatives currently on offer, including the First Home Loan Deposit SchemeHomeBuilder and stamp duty exemptions/concessions.

The quickest way to find out whether you can finance that home you have your eye on is to get in touch with us today – we’d love to explore your financing options with you.

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