Home prices in Sydney, Melbourne and Brisbane have spiked up amid a backdrop of Australians not wanting to take on any kind of debts, a report on ABC stated. It added that the increase in housing prices may have been fueled by Chinese investors as capital cities showed a jump of 1.3 per cent last month while Sydney had a surge of 2.4 per cent.
There are various reasons being pointed out as the basis for the increase in housing prices. Some of the reasons, according to the report, are the low official interest rate, the increased bank discounting and lower lending standards. Chinese investors are also widely believed to be the reason for the growth in housing prices.
The housing boom is not slowing down as Australian capital cities experienced a 1.3 per cent surge in housing prices in October. However, the report argued that the gains in the housing sector are not balanced since it was only the three large cities that only reflected a significant surge.
In Sydney, the price of homes rose by 2.4 per cent while a 1.2 per cent increase was recorded in Melbourne and 1.4 per cent in Brisbane.
For months, the housing prices in both Sydney and Melbourne have been surging up. Brisbane, the report noted, is slowly catching up to the two. The Harbour City is a major contributor to the growth.
One of the major reasons why growth is increasingly obvious, significant and consistent in these large cities is because of the competition between banks as they try to outdo each other in a bid to attract more borrowers.
Macquarie Bank, for example, has been aggressive in the home loans market. Consequently, this will create more competition, especially among Australia's big four banks. And although mortgage rates are lower now, consumers will be attracted more by the competitive prices on fixed rate loans, which have dropped to new heights.
And although the competition may attract growth in terms of housing prices, it does lower lending standards, CLSA banking analyst Brian Johnson commented. He added that banks now are offering package discounts,cash rebates and increased broker commissions.
Graham Andersen, another analyst, stated that the high prices in housing wouldn't be possible if the lending standards didn't fall down because of the competition. Stiff standards and requirements would have not attracted borrowers, he noted.
The aggressiveness of the banks has played well for the housing sector, Mr.Andersen added.