What’s ahead for our economy and our property markets?
While a few property pessimists have recently predicted collapsing property prices a Fairfax Media survey of 25 leading economic forecasters reveals that the east coast property market is not a bubble that will burst any time soon.
In fact, they predict Sydney and Melbourne could enjoy strong growth this coming year.
Interestingly most believe house prices have risen for fundamental economic reasons – not over-exuberance from investors.
They predict, on average, prices will rise by another 10.4 per cent in Sydney this year, and 6.4 per cent in Melbourne.
What the economists had to say:
The Age produced the following interactive summary of their survey:
Housing investment is the only really bright spot, with the panel forecasting an acceleration in growth to 7.5 per cent in the year ahead.
Curiously, only one of the panel expects housing investment to fall — but that member is Shane Garrett, of the Housing Industry Association, so his views ought to be given weight.
The economists argued house prices are being driven higher by exceedingly low mortgage rates, a relatively low unemployment rate, strong population growth, high demand from foreign investors, poor public transportation, and the capital gains tax and negative gearing regime.
Only third of economists – 7 out of 25 – believe there is a housing bubble in Sydney or parts of Melbourne.
They blamed historically-low interest rates, poor government policies, and expectations of ongoing real price gains from investors and home owners.
The panel expects Sydney house prices to surge a further 10.3 per cent in 2015-16, and Melbourne prices 6.4 per cent.
Beyond that, most expect little growth.
Six members expect prices to stay flat, and four expect Sydney prices to slump (by somewhere between 5 per cent and 12 per cent from their peak).
Nicki Hutley, of Urbis Consulting, has the most restrained forecast for 2015-16: price growth of just 2 per cent in Sydney and 4 per cent in Melbourne.
She says what bubbles there are will “deflate rather than burst”.
Read more: The Age