Is Australia’s property market a precarious house of cards waiting to topple? Will values crash and burn due to our status as world leader when it comes to household debt and unaffordable real estate (according to the International Monetary Fund)?
Apparently not if a recent report in The Australian is anything to go by. The article considers data from the QBE LMI Australian Housing Outlook report written by BIS Shrapnel, which predicts that while capital gains will not be over the top for the next few years, house prices are nevertheless set to increase through to 2013.
The report forecasts growth for Sydney, Perth and Adelaide in the vicinity of 20% on average, with more modest growth for Brisbane (15%), Hobart (13%), Darwin and Canberra (both at 12%), while Melbourne is set to lag behind at only 9% growth to 2013, after experiencing strong price gains over the past year.
BIS Shrapnel expect interest rates to hit 9.1% in 2013 due to the strong resources sector triggering greater labour demand. As a result, they predict an annual decline in property prices of around 10% for our major city markets.
“There is a greater degree of caution, but people continue to surprise me by what they are prepared to pay for properties, not just in the top but in the middle end,” said BIS Shrapnel managing director Rob Mellor.
There’s no denying that property prices have come off the boil lately, but the fact is we have strong underlying fundamentals (including continuing population growth, a dwelling undersupply, a resilient economy and excellent employment figures), that should continue to support housing values over the long term.
We may not see the exorbitant gains that occurred during much of this decade, but I don’t believe we will experience anything resembling a crippling price crash any time soon.
Predicted house price growth by forecaster BIS Shrapnel for QBE. Graphic: The Australian Source: The Australian.
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