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One property expert has urged banks not to lower their lending standards after warning that the Sydney market has now reached “dangerous” levels.
Residex founder John Edwards said the median Sydney house price reached $821,500 at the end of April – 20.1 per cent higher than the year before. Unit prices also increased by 13.7 per cent over the same period.
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Mr Edwards said Sydney had not experienced such a long period of price growth since 1988.
“It is reasonable to suggest that this market is approaching a boom mentality and this situation is dangerous, particularly for those who are borrowing heavily to get into the market,” he said.
Mr Edwards said there was little wriggle room for a median Sydney family with a 20 per cent deposit because it must now spend 52 per cent of its after-tax income on mortgage repayments.
The market usually “adjusts” once this ratio passes 50 per cent, he added.
Mr Edwards said the surge in prices was being driven by those on middle-to-lower incomes, who would also have less capacity to absorb future interest rate increases.
“All of this suggests that bankers need to take care and not decrease lending standards to grow their businesses in a competitive market that is showing signs of getting overheated,” he said.
“At the end of the day, a market that is being driven by middle-income Australians can’t grow excessively in a situation where lenders are exercising lending constraints.”
Meanwhile, median house prices rose by 6 per cent across Australia for the 12 months to 30 April 2014, according to Residex.
Melbourne prices jumped 10.9 per cent to $627,500, while Perth grew by 6.7 per cent to $536,500.
Brisbane added 6.2 per cent to $465,000, Adelaide increased 4.9 per cent to $412,500 and Darwin climbed 2.4 per cent to $579,000.
There was minimal growth for Canberra, which grew 1.8 per cent to $528,500, and Hobart, which grew 0.3 per cent to $364,000.
