A continuing rise in demand for Australian housing, combined with an ongoing supply shortage is currently underpinning property values and could conceivably see a further 8 to 10% growth in prices over 2010.
According to a report from Smart Company, the latest Australian Property Monitors data reveals that although overall property value growth slowed to 2.4% in the June quarter, we had a better than expected result of 15% for the year.
In the article, APM economist Matthew Bell says that while there is now evidence of a slowdown occurring, in general the property market is holding its own and it’s expected that prices will rise by up to 10% by the end of the year.
Bell said, “I was quite comfortable in the first quarter, grew more uncomfortable in the second quarter with some of the results, but now I think we’re going to see about 8-10% growth and I’m very happy with that. It’s certainly surprising, and not at all a bad result.
“I think everyone now is talking about capacity constraints, with demand and so on, which will continue pushing up prices.”
APM figures show that Melbourne continues to outperform, with a median of $578,447 for the June quarter on the back of 27% annual growth (but only 4.4% for the quarter which represents the lowest quarterly growth since March 2009).
Sydney’s median rose by 2.3% for the quarter and 13% over the year to $625,488. In Canberra, housing growth was at 1.9% for the quarter and 16.5% for the year to $568,520, while prices dropped in Hobart and Darwin over the quarter by 1.9% (to $308,434) and 0.7% (to $581,290) respectively.
Bell said that for the first time in 12 months, it’s the lower end, more affordable sectors of the market that are pushing up medians as bargain hunters represent the largest portion of active buyers in all cities, with the exception of Brisbane.
“Of course the market is definitely slowing, and we’re seeing low auction clearance rates, but 2.4% is higher than the long-term trend and in cities like Sydney and Melbourne, growth is still very strong,” he said.
According to Bell, investor activity is partially responsible for this continuing growth, with ABS data indicating that although owner-occupied demand for loans hit a nine-year low in April, investor loans grew by 17.6% in the previous 12 months.
Bell also suggests that higher interest rates for the rest of the year are unlikely.
“I think the interest rate risk has largely disappeared, given yesterday’s announcement. Westpac have come out and said they don’t expect any rises this year, and Macquarie have said the same. I would think that interest rate rises have largely disappeared for the rest of the year.”
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