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Property market is still a mixed bag GROWTH in residential property prices is forecast to vary region-by-region in 2007/08, with Brisbane, Melbourne, Adelaide and Canberra expected to show a modest pick-up in growth, according to leading industry analyst and economic forecaster, BIS Shrapnel.At the other end of the spectrum, price growth in the Perth and Darwin markets will begin to pull back as affordability has become a serious issue. Despite the deterioration of affordability across the board after three 0.25 percentage point interest rate rises in calendar 2006, low unemployment and strong wages growth have meant that any serious shake out in prices has not occurred, according to BIS Shrapnel's Residential Properly Prospects, 2007 to 2010 report. The report highlights the strongest growth over the three years to 2010 is likely to occur in Brisbane, underpinned by strong underlying demand, more attractive affordability compared to the other eastern state capitals, strong economic conditions, low vacancy rates and solid rental growth. Moderate price growth is expected to continue in Melbourne, Adelaide and Canberra where prices are forecast to move roughly in line with wages growth, while the upturn will be delayed in Sydney as high prices continue to impact on affordability. House price growth will be modest in Hobart, while Perth and Darwin will be affected by an easing of the resources boom exacerbating the recent deterioration of affordability, according to BIS Shrapnel. "Economic growth has continued to be solid in 2006/07, with jobs growth remaining very strong," said BIS Shrapnel senior project manager and report author, Mr Angie Zigomanis. "High growth in employment is improving household confidence towards investment in residential property. At the same time, demand for housing is being boosted by high overseas migration, so demand for rental properties is rising strongly. Subsequent growth in rentals and improvement in yields will begin to drive some growth in investor demand." However, BIS Shrapnel forecasts the contribution of business investment will begin to taper off during 2008, leading to a brief pause in economic growth and prices before the next round of economic growth. In addition, Zigomanis expects a further 0.25 percentage point interest rate rise by September 2007 will have a dampening effect on residential price growth across all markets in 2007/08, despite healthy underlying demand for new housing and a rising shortfall of dwellings in a number of markets. BIS Shrapnel forecasts interest rates will then remain on hold and expect this stable interest rate environment, coinciding with continued wages growth, will facilitate an acceleration in both construction and price growth in most markets from 2008/09. "The upturn in residential property price growth will be driven by significant pent up demand for new dwellings at the national level and in particular capital city markets," said Zigomanis. "This is already evident in tight vacancy rates in each of the capital city markets, with the rental situation expected to become even more acute over the next two years. "This will drive strong rental growth which will result in improved yields and will have a flow through effect on investor demand for new dwellings and help to buoy construction levels." |
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