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Sydney homebuyers might have to find another $76,600 in the next 12 months

Experts in Finder’s RBA Cash Rate Survey have estimated property prices are set to rise an additional 8 per cent over the next year.

A board of 40 experts and economists have predicted Australian housing prices will continue to boom for the next 12 months despite prolonged lockdowns.

While all panelists correctly predicted a cash rate hold of 0.1 per cent, the vast majority (86 per cent) of those who weighed in on property prices believe that the current wave of lockdowns has not burst the property bubble.

Melbourne was expected to see an additional 9 per cent increase in property prices over the next 12 months, bringing the average house from $753,100 to $818,114. That’s an average spike of $64,014.

But despite a slightly lower percentage estimate of 8 per cent, Sydneysiders will be expected to find an additional $76,619 on average. The predicted price in July 2022 will reach over $1 million.

Perth and Brisbane are also expected to see increases of 8 per cent, while Canberra and Adelaide are estimated to see a 7 per cent rise. Hobart and Darwin will reportedly see a 6 per cent rise.

Graham Cooke, head of consumer research at Finder, said that lockdowns seem to have had little effect on house sales.

“The average Sydney homeowner earned more than the median family wage over the last 12 months in property equity alone, and it looks like they are set to repeat that over the next 12,” Mr Cooke said.

“In both Sydney and Melbourne, the number of houses sold per month remained relatively flat through 2020 and early 2021, before skyrocketing when lockdowns were lifted.

“After lockdowns were eased, the number of properties being sold increased by around a quarter.

“In other words, while lockdowns didn’t dampen the housing market much, the ending of them lit a fire that is still going.”

Mortgage holders still fear rates rises despite cash rate hold

New research also revealed 53 per cent of homeowners are concerned about interest rates increasing in the near future.

This included 15 per cent who fear they may not be able to make their repayments once rates creep up.

For those with an annual household income below $50,000, this figure grows to a worrying 28 per cent.

Mr Cooke said some homeowners may have purchased beyond their means in the midst of the housing market frenzy.

“The past 12 months have seen property prices explode as record numbers of Australians have fled into the housing market.

“Low interest rates have encouraged many buyers to purchase earlier than they otherwise might have for fear of missing out.

“But not all of them will have budgeted for their monthly repayments to go up if or before the cash rate increases,” Mr Cooke said.

Finder analysis reveals the average monthly mortgage payments in Sydney are worth 76 per cent of the average worker’s after-tax earnings – the highest in the country.

Melbourne (57 per cent) is not far behind, followed by Canberra (49 per cent) and Hobart (49 per cent). Perth is at the bottom of the list, with the average mortgage costing a more reasonable 35 per cent of average earnings.

Will there be an incoming recession?

Experts suggested it will only take an average of five more months of NSW lockdowns to match the 7 per cent GDP drop Australia saw between March and June last year.

Half of all respondents who weighed in (47 per cent) think it will take three months or less.

CSA Premium chairperson Peter Boehm said the prolonged lockdowns in Sydney and Melbourne will likely show the Australian economy has entered into a double-dip recession.

Mr Cooke said Australia is almost certainly heading for another recession.

“How deep it will cut, and how quickly we will recover, will depend heavily on when the current lockdowns end and how quickly interstate and international travel are restored.

“Unfortunately, that trifecta of freedom will almost certainly not come until next year,” Mr Cooke said.

Summary of the RBA’s decisions

  • Maintain the cash rate target at 10 basis points and the interest rate on Exchange Settlement balances of zero per cent
  • Maintain the target of 10 basis points for the April 2024 Australian Government bond
  • Purchase government securities at the rate of $4 billion a week and to continue the purchases at this rate until at least mid February 2022

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