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Property Market Crystal Ball: What to Expect in 2015

Author: Peter Boehm

Australian house prices grew by 7.05% overall last year*, while unit values increased by 6.35%, with the eastern state capital city markets dominating growth across the nation in both the house and unit markets. Sales activity also increased last year*, with transactions up 10.49% and 5.34% in the house and unit market respectively. Total sales across the nation was just shy of 500,000 sales for the year*. So, overall, the residential property market performed very well in 2014, albeit some mixed results outside the Sydney, Melbourne and Brisbane capitals.

Related article: Property Market in Review: 2014 - The Year Everything Went Gangbusters

But what’s in store for 2015?

Will the property price growth of 2014 continue this year, or will the market behave differently in 2015? To get a sense of where prices are headed, let’s take a look at some of the key drivers in the market and how they might affect price growth over the next 12 months.

1. Interest Rates

The cost and availability of home and investor loan finance is a key driver in the market. In 2014, this was at historically low levels with no Cash Rate movement throughout the year – the Cash Rate has remained on hold at 2.5 per cent since August 2013.

Related article: RBA Interest Rate Decision Reveals No Rate Change in 2014

I would be very surprised if the Cash Rate moved during the first half of 2015 given the mixed messages we are getting about the strength of the Australian economy and our key trading partners.

For example, the International Monetary Fund (IMF) predicts that the Australian economy will grow by 2.9% in 2015, which is slightly up from 2014 but below Australia’s long term average of 3.25%. This is an important measure because economic growth above the long term average is needed to help boost jobs and