National Housing Market Year in Review 2014 | Dr. Andrew Wilson

Our property markets are fading as interest rate drivers decline and our economy wavers.

Historically low interest rates have activated housing markets over the past two years.

2012 was a year of recovery with rising prices, 2013 a year of expansion with strong prices growth, 2014 was a year of moderation, and 2015 is set be a year of flat activity with most markets struggling to hold the inflationary line.

Interest Rate Impact

Buyer activity in Australia’s housing markets has generally tracked backwards over 2014 as the impact of the lowest interest rates in 60 years

The sharp rise in housing affordability generated by falling interest rates between 2011 and 2013 released pent up demand with prices growth a predictable outcome.

Attracted by the strongest capital growth in three years – and in the case of Sydney ten years – increased investor activity was also a key factor driving prices up in 2014.

Economies Weaken

The continued deterioration of most capital city economies, particularly in regard to relatively high and rising unemployment levels, has been a growing impediment to buyer activity reflecting concerns over job security.

A low growth economy with rising unemployment and the clear end of the stimulus created by the construction phase of the mining boom, has kept incomes and profit growth subdued.

Low incomes growth has acted to offset the effect of low interest rates on affordability and house price growth has moderated as a consequence.

Growth Cycle Moderates

The peak of the current growth cycle was the December quarter 2013 when most capital cities recorded solid to strong prices growth. Growth levels have moderated this year with most capitals recording falling quarterly trends.

Capital City Performance

The Sydney property market  remains the clear leader of the capitals for house price performance recording decade high growth over the past year.

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Sydney’s rate of growth has declined over the year however and will finish the year well below the rates recorded at the end of 2013.

The relatively strong performance of the Sydney housing market over 2014 has reflected the nation leading performance of the local economy.

Investor activity has been a key driver of housing market activity in Sydney with record levels of investors active in the market through 2014.

Prices growth in the Melbourne property market  has clearly decelerated with house prices in that market likely to be around the inflation rate over the full year. With decade high levels of unemployment,

Melbourne’s local economy remains an impediment to housing market activity.

Although the Adelaide, Hobart and Brisbane housing markets  recorded encouraging levels of buyer activity and prices growth over the first half of the year, all have reported flat to falling prices growth over the latter part of 2014.

Constraints to buyer capacity and sentiment in those markets again reflect the underperformance of their local economies.

Following nearly two years of growth, the Perth housing market has continued to flatten over 2014.

Diversity HousingAffordability barriers through previous strong prices growth together with the decline of the local resource based economy have acted to constrain buyer activity.

Similarly, the Darwin housing market has recorded flat growth over 2014, reflecting affordability issues and concerns over the local economy.

The Canberra housing market continues to produce volatile price movements however underlying price growth has remained flat over the past two years.

The local economy’s exposure to the public service is a continual constraint on growth particularly given the strong fiscal consolidation budgetary outcomes from the Federal Government over the past three years.

What to Expect in 2015

The prospects for housing markets in 2015 remain generally subdued.

Concerns over the performance of the national economy are growing, particularly in regard to unemployment.

Interest rates have remained at the current 60 year low of 2.5 percent for 16 consecutive months which is the longest steady sequence since 1997-98.

With a weakening economic outlook particularly in regards to the jobs market, the case is growing for a cut in interest rates by mid-2015.

Without improved economic conditions and the return of incomes growth and confidence, marginally lower interest rates however are unlikely to have a significant effect on housing markets.

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Consequently, house price growth for most capitals in 2015 is likely to be modest at best, hovering around the inflation rate.

The rate of growth in each city, however, will be dependent on local supply and demand factors rather than the overarching impetus of low and falling interest rates which has driven markets generally over the past two years.

The Sydney housing market is set to remain the best performer with growth likely to be at least twice the inflation rate.

A top performing local economy and the continued undersupply of housing will generate consistent buyer activity over the year. Inner and middle ring mid-price range suburban regions are set to continue to record double figure prices growth.


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Dr. Andrew Wilson


Dr Andrew Wilson, of is Australia’s leading property economist.

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