Economists BIS Shrapnel, have recently released their latest forecasts for our property markets and suggest the underlying strength of the Australian economy, stable interest rates in the short term, high immigration and a dire shortage of houses, will once again drive up property prices.
The rise in home prices and shortage of accommodation is also expected to force up rents.
The report forecasts the Perth median house will lift by 19 per cent over the three years to June 2014.
This compares with 20 per cent in, Brisbane 16 per cent in Sydney, 8 per cent in Canberra and only 6 per cent in Melbourne.
It also predicts that first home buyers will start to re-enter the market in greater numbers next year as the outlook for the economy improves. This will in turn encourage others to return, especially upgraders, as demand for their properties improves.
”Sydney hasn’t fallen in a hole and house price growth has been minimal but has held up over the last 12 months,” said Robert Mellor, the managing director of BIS Shrapnel was reported to say in the Courier Mail
But he predicts this will jump to about 5 per cent in 2011-12 and 7 per cent the year after, before growth will start to slow as a result of higher interest rates in 2013.
”At some point in the next few years rising interest rates will become a concern and that will bring a slowing in residential property markets,” Mr Mellor said.
BIS Shrapnel chief economist Frank Gelber warned the Melbourne market was “running out of steam” as supply levels for new homes increased to satisfy demand.
Would-be house buyers would be deterred by a likely 100-basis point increase in interest rates over the next few years. Such a rise would take the official rate to 5.75 per cent.
“The property market will stay stronger over the next few years but there will be no huge increase in (residential) property prices over the next five years in Melbourne,” Mr Gelber said, speaking in Melbourne.
“The next big increase in Melbourne property prices won’t be until the next upward phase of the economy.”
What BIS Shrapnel forecast
City 2011 median price 2014 forecast per cent change
Brisbane $435,000 $505,000 +16.1 per cent
Sydney $644,700 $770,000 +19.4 per cent
Melbourne $590,000 $623,000 +5.6 per cent
Darwin $515,000 $600,000 +16.5 per cent
Canberra $525,000 $565,000 +7.6 per cent
Perth $470,000 $565,000 +20.2 per cent
Adelaide $410,000 $440,000 +7.3 per cent
Hobart $370,000 $395,000 +6.8 per cent
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