New real estate figures appear to be good news for Illawarra home owners, but bad news for new home buyers.
Property consultant CoreLogic’s Hedonic Home Value Index April 2017 results were issued this week. The numbers reveal that the median house price for the Illawarra grew 3.4 per cent to $632,500.
“This is the strongest March quarter house price growth recorded since the Global Financial Crisis hit markets a little over 10 years ago,” Alex Frino, Professor of Economics at the University of Wollongong said.
“The house price growth is driven by historically low interest rates that we have experienced in the last 10 years as the Reserve Bank has sought to support the economy in the wake of the Global Financial Crisis.”
Prof Frino said whether this trend continues will depend on what the Reserve Bank does with interest rates in coming months.
“These figures, while good for home owners, are bad news for new home buyers,” he told the Mercury.
“With incomes growing at around 30 per cent in the last 10 years, the growth in housing prices outstrips the growth in incomes and confirm that home ownership is increasingly out of reach for the average Illawarra resident.
“The government has flagged a housing affordability package in the budget next week, though the form of that package is as yet unclear.”
Prof Frino said unfortunately the federal budget leaks seen to date focused on giving more money to potential home buyers, in particular first home buyers.
“I think that’s the wrong way to go, because if the housing stock, the number of houses and units in the community doesn't grow very much, and you just give people more money to buy those, all that’s going to happen is that money is going to further push up the price of housing,” he said. “What we need to see in the budget is something that continues to promote the construction of new housing.”
Prof Frino said house prices for the Wollongong statistical region only grew 2.8 per cent, indicating the strong growth figure for the Illawarra is driven by price growth outside of Wollongong.
Housing supply increase required
CoreLogic’s data also shows that the Illawarra’s median house price has grown by about 64 per cent in the past decade, and the median price of units has increased by 73 per cent.
Prof Frino said these trends suggest demand for housing in the Illawarra is at the cheaper end of the housing market – and the construction of units has not kept pace with demand.
Kim Rawson, regional director for the Illawarra at the Property Council of Australia said one of the reasons for the rise in real estate in the first quarter could be an overflow effect from the Sydney market. “The Illawarra region has infrastructure and a work/life balance that is attractive to people who are finding it difficult to buy a home in Sydney,” she said.
“To meet this increase in demand, more housing supply must be encouraged in the Illawarra so that local prices stay affordable.
“One of the opportunities to open up housing supply and development in the region would be for the state government to absorb some of the costs on the West Dapto project. The government were responsible for choosing the site and it is affected by flooding issues. They need to put their money where their mouth is.”