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What Will Happen to Real Estate in Australia in 2014?

By Brittany Freebairn

Throughout 2013, real estate in Australia experienced strong growth in many capital cities across the country.

There is no doubt the Sydney, Perth and Melbourne property markets have been hot topics over recent months, after all cities experienced positive annual home value growth over the year to November 2013.

But once the new year rolls around, many people may be wondering what is in store for the Australian real estate market in 2014.

Interest rates

At the final board meeting for 2013, the Reserve Bank of Australia (RBA) left the official cash rate at 2.5 per cent.

The RBA board cited below-average growth in the global and Australian markets, while inflation was consistent with the medium-term target.

In a December 3 statement, Loan Market Director Mark De Martino said the RBA’s decision in December was the right choice, however it was “not a straightforward one”.

Mr De Martino expects the property market will continue to recover and set new highs, and investors will fuel most of this growth.

Minutes from the RBA’s board meeting in December have not ruled out further cash rate reductions next year. The board noted it will hold the cash rate steady at 2.5 per cent in order to “gauge the effects of earlier reductions”.

However, the minutes read it will not “close off the possibility of reducing it further should that be appropriate to support sustainable growth in economic activity”.

This means there could be space for a further cash rate cut on the new year, dependent on economic conditions.

Property markets

According to the RP Data-Rismark Home Value Index, Sydney, Perth and Melbourne recorded annual value rises of 12.5 per cent, 8.9 per cent and 6.6 per cent respectively over the 12 months to November.

Quarterly growth has also been strong for many of the state capitals, which demonstrates the current positive buyer sentiment in the market.

This growth has been echoed in research from the Real Estate Institute of Australia (REIA) in conjunction with Bendigo Bank.

The Real Estate Market Facts publication revealed the real estate market in Australia is currently in a “growth phase”, after many cities reported rises in median house prices.

“The weighted average, capital city, median price increased 3 per cent for houses and 2.2 per cent for other dwellings during the September quarter,” said REIA President Peter Bushby in a December 11 statement.

Mr Bushby stated he expects interest rates will stay low for the next year and will continue to assist the property market.

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