Jamie McIntyre Predicts Australian Housing Prices will Rise by 10 per cent

Some so-called property experts have been predicting that the housing market in Australia will crash. Nevertheless, reports, statistics and a very reasonable analysis by Stephen Koukoulas in the business spectator indicate otherwise.

Business Spectator reports that the HIA-CBA Housing Affordability index shows that national affordability in the September quarter 2012 rose to the highest level since 2009 to be just shy of the highest level in a decade. When the December quarter data is available around the middle of February, affordability will have had a further significant boost, perhaps to be at near multi-decade highs.

Koukoulas explains that this is because during the December quarter, mortgage interest rates fell by around 40 basis points as the Reserve Bank sliced the official cash rate by 50 basis points. The level of interest rates is a critically important aspect in determining whether or not buyers are able to step up in the housing market and borrow more and pay more for houses.

The journalist goes on to elucidate that while the daily house price data from RP Data is clearly volatile and prone to reversal when viewed in small increments, it is somewhat interesting that house prices in the first ten days of 2013 had already risen by 0.6 per cent. It would be premature to get too enthused about these sorts of very short-term moves, and there are some quirks in the daily data, but something just might be afoot with such a significant rise already he said.

“The reasons behind my expected strong rise in house prices this year are linked to issues associated with housing affordability (interest rates, current house prices and wages) plus the consistently low unemployment rate, a tight rental market and a likely positive wealth effect from what has been a strong lift in the stock market.

“An acceleration in population growth is another factor that is likely to add to underlying demand for housing” writes Stephen Koukoulas.

His article elaborates on the fact that unemployment rate has remained below 5.5 per cent indicating the opportunity that enables obtaining loans. With consumer finances in sound shape and saving levels replenished over the years-borrowers are increasingly taking advantage of the current interest rate cutting cycle to pay off the principal in their current mortgage.

“This robust balance sheet for consumers frees them up to ramp up borrowing and bid up house prices in the not too distant future” he says.

Jamie McIntyre founder and CEO of 21^st Century Group and an avid property investor in the US and Australia agrees with this perspective. Mr McIntyre is also optimistic about Australian property in 2013 stating that it just might be one of the best years for real estate investment in Australia.

Akin to Koukoulas, he agrees that property prices could go up by 10 per cent.

In 2008 economists such as Professor Steven Keen and Harry Dent predicted that Australian Property market would crash by 40 per cent.

At the time Mr McIntyre refuted the conjecture on radio and stated that Australian property prices would rise by 18 per cent.

An estimate of this kind at the start of the Credit Crisis was a brave call, however, Melbourne prices rose by 18 per cent within a few years and Australian property never crashed 40 per cent.

For 2013, Mr McIntyre states that interest rates will continue to fall, the population is on the rise and it is unlikely that the construction industry will be able to keep up with the rising demand.

According to the entrepreneur, these are signs for growth in property market.